Slowdown Reflects Inventory Normalization, but Rebound Expected Before
TORONTO, June 26, 2012 /CNW/ - Global vehicle sales rebounded in May,
with the advance accelerating to 11 per cent year over year (y/y), the
strongest gain in more than two years and nearly double the increase
reported from January to May, according to a Global Auto Report
released today by Scotiabank Economics. North America and Asia led the
way last month, with sales in China advancing 20 per cent y/y, as
recent government policies have started to buoy gains. In contrast,
activity shows no signs of hitting bottom in Western Europe and remains
soft in Latin America.
"The auto industry has been a growth leader across North America in the
first half of 2012, with stronger-than-expected car and light truck
sales and the restocking of depleted inventories by Japanese automakers
buoying production gains," said Carlos Gomes, Senior Economist and Auto
Industry Specialist, Scotiabank Economics. "However, with inventories
back at normal levels - around 60 days' supply - vehicle assemblies are
set to soften between July and September."
Vehicle production in North America jumped 23 per cent y/y in the five
months through May, led by a 27 per cent surge in the United States. In
fact, U.S. vehicle production climbed to an annualized 10.3 million
units in the opening months of 2012 -- the highest level since late
However, despite recent announcements of reduced summer downtime by
several automakers due to strong demand, assemblies across North
America are scheduled to ease to 15.6 million in the third quarter,
temporarily halting the industry's robust contribution to economic
"We estimate that the summer lull in vehicle production will have the
largest negative impact on U.S. economic activity since early 2009,
when the global economy was still in freefall," added Mr. Gomes. "The
third-quarter decline in vehicle production will be more modest in
Canada, cushioned by rising output of the Honda CR-V in Alliston,
Ontario. In contrast, assemblies in Mexico are scheduled to advance
further, as Japanese automakers continue to expand their facilities in
the most southern NAFTA member."
Despite the industry's temporary setback, fundamentals remain supportive
of further advances in both vehicle sales and production. In
particular, leading indicators of the U.S. auto sector point to ongoing
gains for an extended period. While the Scotiabank Leading Indicator of
U.S. Vehicle Sales has recently edged down from its peak in mid-2011,
the index remains at one the highest levels on record, pointing to
further improvement ahead.
Looking at last month's vehicle sales across North America, U.S. volumes
jumped 26 per cent above a year earlier, but the annualized pace eased
below 14.0 million units for the first time since December, and was
down from an average of 14.5 million between January and April.
In Canada, activity was stronger than expected in May, with purchases
climbing back above an annualized 1.70 million units, a rebound from a
sluggish performance in April. The improvement was broad based, with
both fleet and household purchases posting solid double-digit gains, as
Canadians took advantage of enhanced incentives.
Scotiabank economists and market strategists are located in Canada, the
U.S., Mexico, Peru, Chile, Thailand, Hong Kong, the United Kingdom and
France. The team provides in-depth commentary regarding the factors
shaping the outlook for the global economy, currencies, capital markets
and commodities as well as coverage of monetary and public policy
SOURCE Scotiabank - Economic Reports
For further information:
Carlos Gomes, Scotia Economics, (416) 866-4735, email@example.com; or
Joe Konecny, Scotiabank Media Communications, (416) 933-1795, firstname.lastname@example.org.