TORONTO, Jan. 30, 2013 /CNW/ - Canadian auto sales climbed 6% last year, and will edge up further in 2013, advancing to 1.69 million units - the second-highest level on record, according to the Scotiabank Global Auto Report released today.

"The resource-rich provinces of Alberta, Saskatchewan, Newfoundland and Labrador will continue to lead gains." said Carlos Gomes, Scotiabank's Senior Economist and Auto Industry Specialist. "Purchases in these provinces set record highs in 2012, climbing above the 2007 peak. In contrast, even with a moderate gain in the coming year, volumes in the rest of Canada will remain 6% below the 2002 peak."

For more details about the Scotiabank Global Auto Report, please read the full report below. Highlights include why Alberta will be the auto industry's growth leader in 2013, as well as a province-by-province breakdown of vehicles sales.

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Resource-Rich Provinces Will Continue to Drive Sales Gains in Canada 

Canadian auto sales climbed 6% last year, and will edge up further in 2013, advancing to 1.69 million units - the second-highest level on record. The resource-rich provinces of Alberta, Saskatchewan, Newfoundland and Labrador will continue to lead gains. Purchases in these provinces set record highs in 2012, climbing above the 2007 peak. In contrast, even with a moderate gain in the coming year, volumes in the rest of Canada will remain 6% below the 2002 peak.

Labour markets, demographic trends and development activity are strongest in Western Canada, while a ramp up of several projects on the east coast will support regional gains. Commodity prices have rebounded since last summer, and will be underpinned over the coming year by the recent pick up of economic growth in China and improving global financial market conditions. Global equity markets have advanced by more than 20% since mid-2012, including 5% during the first four weeks of 2013.

Alberta will be the auto industry's growth leader in 2013. Vehicle sales in Alberta climbed to 239,000 units last year - the second-highest on record. We expect volumes to advance to 244,000 units in 2013, approaching the 2007 peak of 249,000 cars and light trucks. Sales will be bolstered by a buoyant labour market, record population inflows and continuing, albeit a single-digit increase in energy sector investments. Unemployment in Alberta has dropped to only 4.5% - the lowest level in Canada and nearly 3 percentage points below the national average. Meanwhile, population growth accelerated to 2.5% last year - nearly triple the advance in the rest of Canada. Alberta's driving age population is increasing at even a faster pace. Despite these positive developments, the improvement in vehicle sales will be dampened by some slowing in energy sector investment. The export price for Canadian heavy crude has fallen to a substantial discount from international benchmark prices due to export pipeline constraints. The sharp widening in the discount for Canadian heavy crude oil is hurting Alberta's public finances, prompting its premier to warn last week of a $6 bn revenue shortfall for the 2013-14 fiscal year.

Vehicle sales in Saskatchewan climbed to a record-high 55,000 units in 2012, buoyed by a solid gain in farm incomes and ongoing expansion of the mineral sector. An increase in purchases to 56,000 units is projected for 2013, bolstered by the government of Saskatchewan's commitment to spent at least $2.5 bn on infrastructure over the next several years and the scheduled start-up of the Cigar Lake uranium mine in late 2013. Despite declining mineral and natural gas production in Saskatchewan over the past year, the province still expects investments of nearly $45 billion in major resource projects over the next decade - a development which will keep labour and auto markets among the strongest in Canada.

Newfoundland and Labrador also reported record car and light truck sales in 2012, with volumes jumping to 33,000 units - 29% above the 2001-08 average. Purchases will be boosted this year by a rebound in offshore oil production and increased iron ore output. After weakening in the first half of 2012 alongside slowing global economic activity, China's imports of iron ore jumped to record highs late last year, setting the stage for higher prices and a ramp up in iron ore production across Newfoundland in 2013. Oil output is also set to rebound, with production resuming at both the Sea Rose and Terra Nova projects, after being offline for maintenance last year.

However, longer-term gains in car and light trucks sales will be constrained by weak vehicle-buying demographics in Newfoundland. In fact, the demographic outlook is worse for the province than for its Maritime neighbours. The vehicle-buying population in Newfoundland and Labrador declined by 0.2% last year and is projected to slump 0.5% annually over the next five years. In contrast, the number of potential vehicle buyers is projected to continue to edge higher across much of Atlantic Canada.

Vehicle sales in Manitoba advanced 6% last year, in line with the improvement across Canada. We expect a further modest gain in 2013, underpinned by increased agricultural and construction activity. The value of building permits in Manitoba jumped by nearly 30% last year, nearly three times the advance in the national average. A gradual pickup in global demand for the province's diversified exports will also support further gains in auto sales. In particular, aerospace shipments in Manitoba surged 20% last year, outpacing gains in other sectors.

Vehicle sales in British Columbia rose 10% last year to 173,000 units - the highest level since 2008. Volumes will be supported over the coming year by rising exports to Asia - the destination for more than 40% of the province's international shipments - and the ongoing revival in the U.S. housing market. However, despite an improving external environment, offshore exports account for less than one-quarter of overall economic activity in B.C. Households are the key drivers of the  economy, accounting for 62% of overall activity - nearly 7 percentage points above the national average. In particular, we expect a slowing labour market and declining residential real estate prices to weigh on consumer confidence -British Columbians were the most upbeat Canadians in late 2012 - limiting the gain in vehicle sales to less than 1%.

Car and light truck purchases in Ontario jumped above 600,000 units last year for the first time since 2006, led by a 9% increase in fleet purchases. Household volumes improved a more moderate 4%, but set a decade high of 530,000 last year. Further modest gains are expected in 2013, as the ongoing improvement in manufacturing - led by a revival in the auto sector - more than offsets restraint from both the federal and provincial governments. The auto parts sector led Ontario's manufacturing employment growth last year, advancing by 5% -the strongest increase since the turn of the millennium. Further gains are scheduled for 2013, as vehicle production strengthens to 2.6 million units - the highest level since 2005.

Quebec's auto market lagged last year, with volumes advancing by only 1% alongside sluggish employment growth and increased taxes. Purchases are expected to edge up to 417,000 units in 2013, supported by rising private sector investment and a modest improvement in the key aerospace sector. The largest aerospace company in Quebec recently announced a near-doubling in aircraft orders last year, and employment in the sector has begun to reverse a four-year slide.

The increase in vehicle sales across New Brunswick was also smaller than the national average. However, last year's 1% advance was enough to lift sales to a decade high of 39,000 units. Further gains will be supported over the coming year by rising exports to the United States. Cross-border shipments are the main driver of the provincial economy, with international and inter-provincial exports accounting for nearly 80% of overall economic activity. Increased potash production, following the completion of a $1.7 bn investment, combined with rising lumber exports to the U.S. will boost provincial spending and  help lift vehicle sales to 40,000 units in 2013.

Nova Scotia posted a 7% advance in vehicle sales last year to 48,000 units. A further small improvement will be underpinned by expansion of the Halifax Shipyard to accommodate the building of combat ships starting in 2015. Several other projects, including construction of the Halifax Convention Centre, will also boost employment and vehicle purchases in the coming year.

SOURCE: Scotiabank - Economic Reports