It’s a widespread belief that the Australian economy is on the breadline, ready to follow the US, New Zealand, Denmark, the UK, France, Spain and Italy over the edge and down the slippery slope of recession.
And it’s clear the economy is slowing sharply, except for one very important sector, car sales. Despite higher interest rates, higher oil prices and low consumer confidence, the rate of growth in sales has hardly been dented this year, unlike what we have seen in the US and Europe where sales are down 8%-13% in a month.
Indeed, the US car industry is heading towards its worst year in 14 or 15 years, with tens of billions of dollars lost, job cuts, plant closures, big cuts in advertising, huge losses in leasing and questions being asked about the future of General Motors, Ford and Chrysler.
Local car production was higher in the first six months of this year than last year (thanks in part to exports to the Middle East by Toyota) and sales are still 2.6% higher over the first seven months of the year, compared to the same period of 2007. That’s despite a fall in July and a 2.1% fall in passenger car sales in the year to July.
Commercial vehicles (bought by business, but with some diesel powered models now being sold to private buyers in increasing quantities) and most types of sports utility vehicles, are still higher (even if they are diesel models. Diesel fuel sells at a premium to petrol).
If you were looking at the performance of the car industry you’d ask; slow down, what slowdown? It just isn’t there.
Despite the moans from the industry about the impact of the new luxury vehicle tax, there’s every chance that total sales this year could end up close to last year’s record of 1.049 million.
In fact, with only a slight fall in sales over the next five months, total sales could end up the second or third highest in record, which is quite a contrast to the depressed US industry and the slumping European and Japanese markets.
Yes, retail sales, building approvals and home building are lower and trending lower, and yes, the Reserve Bank is on the cusp of a rate cut, the first in seven years, with a trim of 0.25%-0.50% now expected on September 2.
And, yes there’s a downward trend now evident in home sales, while there’s also a very real slowdown in credit, especially for home building, personal and business.
Figures from the Federated Chamber of Automotive Industries show that nearly 84,000 vehicles were retailed to dealers by importers and manufacturers last month. That was down on the 86,291 in the same month of last year and down on June’s figure. But that was distorted by the luxury car sales tax. Sales were well above the 77,562 of July 2006 (when oil prices were rising and there was fighting in the Middle East).
Sales of “upper large” and people mover type vehicles were down sharply in July, as expected, but apart from a fall in sales of compact SUVs, sales of medium, large and luxury SUVs were all up.
Judging by the amount of talk about the iniquities of high interest rates and petrol and diesel prices, you would have expected the car industry to be facing ruin, just like the US.
That’s not the case at all. More Australian whinging?