Economy: Declining vehicle sales an indicator of trouble

2008-03-21 00:00

EVIDENCE is mounting the consumer-driven side of the economy is beginning to experience a significant decline in the rate of growth, particularly the South African motor trade sector.

Motor trade sales for January 2008 increased by only 4,6% year-on-year — a stark contrast to the 18,8% year-on-year rise in sales for the corresponding period of 2007.

Investment Solutions chief economist, Chris Hart told The Witness that the latest sales figure proves that the motor trade sector is in a recession, due to a consumer market that is under severe pressure.

He said supply continues to outstrip demand, resulting in certain vehicle manufacturers having to cut down on production.

He added that even the second-hand vehicle market has experienced a downturn.

Enterprises surveyed in Statistics South Africa’s motor trade sales report include vehicle dealers; filling stations and workshops; motorcycle dealers; spares and accessories dealers; panel beaters and spray painters; tyre dealers and auto-electricians.

Although income from fuel sales rose significantly, this was as a result of higher fuel prices.

The higher income from fuel sales therefore helped support overall sales figures in the motor retail trade sector.

Meanwhile, other data released yesterday revealed that wholesale trade sales for January 2008 increased by 8,2% year on year, a strong but surprising rebound from the 2,5% rise recorded for December 2007.

However, expectations remain that the rate of increase will decline in 2008 as interest rates dig deeper into the pockets of consumers, Fanie Joubert, economist at the Efficient Group, said.

“The upturn in the wholesale data comes as somewhat of a surprise as retail sales and consumer spending has been slowing in recent months. It is also clear that the electricity shortages had marginal [if any] impact on wholesalers during January.

Much of this is due to the fuel related and machinery sub-categories — following oil-price rises and increased production in the economy.”

With respect to other wholesale categories, food, beverage and tobacco sales again rose sharply in January 2008 (17,6% year on year).

“Food inflation has been rising at a stellar pace throughout 2007, no doubt inflating the value of sales and making it difficult to distinguish between real increases in volume versus price rises,” noted Joubert.

Interestingly, there are indications that consumers are refraining from buying luxury-type items, focusing instead on necessities.

The monthly survey of the wholesale trade industry covers a variety of different wholesale enterprises across South Africa.

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