Big Payout at the Pumps Drives Small, Fuel-Efficient Car Sales: Scotia Economics

  • Japanese parts shortage to cut global auto output

TORONTO, May 10 /CNW/ - Global car sales continue to strengthen, despite a sharp plunge in Japan following the March 11th earthquake and tsunami, according to the latest Global Auto Report released today by Scotia Economics. In the United States, car and light truck sales remained above an annualized 13 million units for the third consecutive month in April, even as gasoline prices approached US$4.00 per gallon - a level that derailed the market in 2008. Sales in Canada have also strengthened in recent months, averaging an annualized 1.67 million units in March and April, well above our full-year 2011 forecast of 1.59 million units.

"Given the stronger-than-expected performance in Canada, we are maintaining our full-year sales forecast unchanged even as volumes are expected to weaken over the summer and early autumn, due to a shortage of vehicles from Japanese automakers," said Carlos Gomes, Senior Economist and Auto Industry Specialist, Scotia Economics. "The sales gains have been strongest in the resource-rich provinces of Western Canada, with purchases west of the Ontario-Manitoba border jumping 14 per cent year over year in March, to an annualized 520,000 units - the highest level since the summer of 2008."

Ongoing sales gains are being driven by improving labour markets not only in North America, but throughout the world. Global job creation is currently advancing by nearly two per cent year over year - the strongest pace since late 2007. In particular, the U.S. economy has added jobs in each of the past seven consecutive months, with payrolls climbing by 1.2 million jobs since September. In fact, over the past five months, the pace of job creation has been the fastest in five years, reducing unemployment by nearly a percentage point in the year to April.

"We expect continued job and sales gains, as the Scotiabank Leading Indicator of U.S. Auto Sales is currently at the highest level in more than six years, pointing to ongoing gains," stated Mr. Gomes. "In previous cycles, the Index always peaked at least six months prior to a pronounced weakening in the U.S. auto market. The labour market is even stronger in Canada, with job creation averaging 1.7 per cent year over year in the past year - 0.7 percentage points above the pace in the United States, though concern over increased household debt could limit the extent of further gains."

According to the report, Canadian and American households have started to increasingly buy smaller, more fuel-efficient vehicles, a trend that emerged once oil prices surpassed US$100 per barrel in March. In the United States, sales of compact cars and small CUVs soared 40 per cent above a year earlier in both March and April, and now account for nearly one-quarter of overall volumes, up from only 18 per cent in 2007 and less than 20 per cent in 2010. These models are also leading the sales gains in Canada, jumping 23 per cent year over year in April - a sharp reversal from previous months when pickups and minivans were leading the way.

"Even with the shift to smaller vehicles, automaker profitability continues to improve," added Mr. Gomes. "Earnings for the two largest North American automakers jumped to roughly US$2,400 per vehicle in their home market - a 10 per cent increase from the 2010 average. Improving profitability reflects rising vehicle transactions prices, in part due to lower incentives. Automakers in the United States recently reduced incentives to the lowest level in more than five years."

Despite strong global demand, Japanese automakers were forced to slash production in Japan 57 per cent below a year earlier in March, due to the impact of the earthquake and tsunami. Their overseas assemblies remained unaffected through March, climbing to a record high of 1.2 million units. However, overseas production is set to plunge, as automakers operate their overseas plants at about 50 per cent of capacity through at least the end of the second quarter. We estimate that a global shortage of auto parts originating in Japan have led automakers to slash their second-quarter North American vehicle assemblies nearly 400,000 units below their original plans. These cutbacks will dampen economic activity, especially in Canada, where Japanese automakers account for 36 per cent of overall vehicle production.

"With Japanese automakers assembling more vehicles outside of Japan than in their home market, the impact of the auto parts shortage on global vehicle output and the global economy will begin to emerge with the release of April economic data in most countries," concluded Mr. Gomes. "In particular, Asia - excluding Japan - accounts for more than half of all overseas assemblies by Japanese automakers. We estimate that these cutbacks will reduce vehicle output in the region by 13 per cent between April and early June. The reductions will be largest in Thailand and Taiwan, as Japanese automakers account for more than 60 per cent of overall assemblies in these two nations. However, even India and China will experience significant slowdowns, as Japanese manufacturers represent 40 per cent and 15 per cent of overall vehicle output respectively."

Scotia Economics provides clients with in-depth research into the factors shaping the outlook for Canada and the global economy, including macroeconomic developments, currency and capital market trends, commodity and industry performance, as well as monetary, fiscal and public policy issues.

SOURCE Scotiabank

For further information:

Carlos Gomes, Scotia Economics, (416) 866-4735,;
Patty Stathokostas, Scotiabank Media Communications, (416) 866-3625,


Jetez un coup d’œil sur nos forfaits personnalisés ou créez le vôtre selon vos besoins de communication particuliers.

Commencez dès aujourd'hui .


Remplissez un formulaire d'adhésion à CNW ou communiquez avec nous au 1-877-269-7890.


Demandez plus d'informations sur les produits et services de CNW ou communiquez avec nous au 1‑877-269-7890.