The improvement in South African motor trade sales growth to 17.2% y/y in June from 11.1% y/y in May did little to reverse the underlying downward trend in vehicles demand in the economy.
Data released by Stats SA on Thursday showed that on a quarterly basis, growth declined to 12.9% y/y in Q2 2011 from 15.3% y/y in Q1 2011.
Household balance sheets have come under increased pressure as a result of sharp rise in essential consumer goods prices, including food and fuel, in recent months.
Although the FNB Consumer Confidence Index improved to 11 points in Q2 2011 from 9 points in Q1 2011, the decline in vehicle sales growth, coinciding with the decline in household credit extension growth, to 6.9% y/y in Q2 2011 from 7.1% y/y in Q1 2011, is telling of a gradual weakening in household consumption demand.
Nevertheless, the used vehicle sales market is likely to benefit from the tightening in household balance sheets, generally providing vehicles at a lower cost than the new vehicle sales market. In addition, carbon emissions taxes do not apply to the used vehicle market, further contributing to the financial save.
Used vehicle sales growth was a major driver of the rise in total motor trade sales growth in June, rising to 20.7% y/y in the month, from 6.6% y/y in May 2011. Used vehicle sales growth improved to 10.5% y/y in Q2 2011 from 9.5% y/y in Q1 2011. The slight recovery in new vehicle sales prices in recent months is likely to contribute to an upward trend in the used vehicle sales growth.
While a gradual decline remains most likely for motor trade sales in the remainder of the year, the favourable interest rate environment is likely to maintain an adequate level of demand in the sector, preventing a negative sales growth. This should contribute positively to related manufacturing sectors in the economy for some time to come.
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