Improving Consumer Fundamentals Drives Sales Acceleration and Broadens Gains Beyond Autos

Scotiabank

TORONTO, ON--(Marketwired - September 29, 2016) - Global car sales remained in the fast lane through the summer, advancing 8% y/y in August and lifting the year-to-date advance to nearly 6% -- the strongest gain in three years. The improvement was driven by a 20% y/y surge across Asia last month as well as by continued strong gains in Western Europe.

China has been the key driver of the acceleration in car sales across Asia this year, but purchases have also picked up through the rest of the region. Excluding China, car sales in Asia climbed 4.4% y/y in August, double the advance through July. The improvement reflects some pickup in economic activity, especially in the key high-tech sector, which lifted Taiwan's export orders at a double-digit pace for the first time since early 2015.

While global car sales have been stronger than expected this year, the acceleration in consumer spending has been much broader than just the auto sector, and is being driven by improving household fundamentals. Labour markets have gained momentum across most regions, reducing unemployment in Organization for Economic Co-operation and Development (OECD) countries to the lowest level in nearly a decade and lifting incomes at the fastest pace since the global expansion began in mid-2009. Household balance sheets also continue to be buoyed by ongoing asset price appreciation, helping to broaden the advance in overall consumer purchases.

"Consumers are increasing their market share of overall global economic activity," said Carlos Gomes, Senior Economist and Auto Industry Specialist at Scotiabank. "Looking at the global auto market, even with record sales, purchases in developed markets still remain below historical averages and significant replacement demand remains in most countries, pointing to an automotive market with further 'room to run.'"

Real non-automotive spending has been accelerating in the United States and is now advancing 3% y/y -- the fastest growth since 2006. A similar trend is also evident across Western Europe and represents a significant reversal from the declines in place from early 2008 through late 2013. The advance is even stronger in Eastern Europe, with several nations reporting increases in real non-automotive spending approaching a double-digit pace.