In the month that just ended passenger cars rose by a surprising 21.4% year-on-year proving that the recession is fianlly over and people can once again go out and spend.
Here is an analysis from Stanlib economist Kevin Lings.
In February 2010, new passenger vehicle sales (as reported by NAAMSA) rose by a very impressive and somewhat surprising 21.4%y/y. This follows growth of 15.3%y/y in January. Sales in 2010 are off to a fantastic start after three years of decline. For 2009 as a whole passenger vehicle sales declined by a very significant 23.1%y/y, which is the worst annual rate of decline in decades.
Light commercial vehicle sales also recorded an improved performance in February 2010, with sales up 12.9%y/y after growing by 9.2%y/y in January 2010. This compares with a drop of -32.1%y/y in 2009. (Vehicle sales are extremely seasonal, correspondingly there is little merit in analysing sales on a month-on-month basis).
The disastrous vehicle sales in 2009 created a very low base of activity in the industry. This low base, coupled with an increase in the monthly demand for vehicles will tend to exacerbate the annual rates of change during 2010, especially in the first half of year for both passenger and light commercial vehicles.
The motor industry is the most volatile manufacturing industry in South Africa, measured over any significant time period. Hence this extreme gyration in sales is not totally unexpected. In both 2004 and 2005 sales of passenger car sales rose by more than 20% (in volume terms), but then declined for three consecutive years.
In contrast with the improved performance from passenger and light commercial vehicles, medium and heavy vehicle sales continued to decline in February, dropping 34.3%y/y and 27.8%y/y respectively. Interestingly, sales of large buses, while still a very small market, rose by 71%y/y in February and have increased by 39% in the past three months (Dec 2009 to Feb 2010) compared with the corresponding period a year-ago. This improvement could well relate to the upcoming world cup.
Fortunately, passenger and light commercial vehicle sales appear to have now moved convincingly past their worst and hopefully the combination of lower interest rates and slightly easier bank lending conditions will systematically lead to improved sales in the months ahead. We expect passenger car sales to show an encouraging improvement in volumes of around 10% to 15% in calendar 2010.
The latest improvement in car sales would be another factor supporting the argument for interest rates to remain on hold in March.
source:timeslive
