- Global auto sales expanded at a solid pace in the first half of 2018 on the back of strong gains in emerging economies as well as better-than anticipated sales figures in the US.
- Canada and the US remain near record-highs, and are only set to post a slight decline in 2018 amid a moderation in household consumption growth and a reversal of base effect gains in the US.
- Cracks are beginning to appear in certain emerging economies. The Chinese auto market seems to have been impacted by the threat of rising US protectionism while vehicle purchases in Brazil and Argentina have slowed in recent months amid a loss of economic momentum.
- Auto purchases in the core of Europe are split between robust growth in France, Germany, and Spain, and declining sales in the UK and Italy where political uncertainty is denting household confidence.
CANADA AND US: SLIGHTLY BELOW RECORD-HIGHS
Vehicle sales in Canada and the US continued on a slight downward trajectory in the first half of 2018 alongside a moderation in household consumption growth, though both are still set to close 2018 near their respective record-high levels in 2017 and 2016. In Canada, auto volumes fell by 1.1% y/y in June which marked a minor fall of 0.2% y/y YTD. Auto purchases in the US climbed by 4.7% y/y in June for a year-to-date (YTD) rise of 1.1% y/y. The year-on-year increase so far in 2018, however, is a result of weak auto sales in the first half of 2017 owing to poor fleet sales figures. This decline was compensated in the remainder of the year by a surge in auto demand due to vehicle replacement from hurricane damage. For more details on country-wide sales figures in Canada and the US, please refer to the July 6 Global Auto Report.
CANADIAN PROVINCES: STRENGTH IN ONTARIO COUNTERS WEAKNESS IN THE WEST
Rising auto sales in Ontario, and to a lesser degree Quebec, have prevented a large decline Canada-wide following a sharp contraction in the Western provinces in the first six months of 2018. Vehicle sales in Ontario have climbed by 1.9% y/y YTD in 2018, as employment in the province expanded by 2.2% y/y in June, the largest increase among the provinces after PEI’s 2.4% y/y rise.
British Columbians scaled back their pace of spending in the first half of 2018 amid a slowdown in labour markets, for a YTD decline in sales volumes of 2.5% y/y. While employment in BC climbed by 3.7% in 2017, annual employment growth has slowed in 2018 and even contracted by 0.8% y/y in June; the decline is particularly pronounced in the financial and real estate sector where employment decreased by 10% y/y in June, likely in response to the slowdown in the real estate market following the imposition of stricter mortgage underwriting standards. Auto sales growth in Saskatchewan and Alberta has whiplashed from strong numbers in 2017, owing to the recovery in commodity prices and replacement following the Fort McMurray wildfires, to sales declines in 2018 of 10.3% y/y and 3.2% y/y YTD, respectively.
Fleet sales have compensated for a decline in retail volumes in Canada so far in 2018. However, the increase in activity in the fleet market is driven by an anomalous surge in deliveries in Manitoba, where fleet sales have surged by 225% y/y YTD, with nearly all the gains concentrated on one automaker. Excluding the Manitoba market, fleet sales are down by 3.2% y/y YTD for Canada as a whole, around ten times the 0.3% y/y decline in retail sales. Retail purchases have risen only in Ontario in the first half of 2018. Household consumption growth in Ontario remains relatively sound, though weaker than last year, despite abnormally poor weather in the early months of the year and a temporary cooling of the provincial real estate market.