The slump in car sales in Australia continued in October, but at nowhere near the rate that US cars fell in the same month.

Australian new car sales were 10.6% lower than in October 2007, and down 0.5% on September 2008. But the year on year fall has accelerated from the 7.2% slump in August of this year, from August 2007.

European car sales were off 14.5% on the same month a year ago, and US car sales fell a terrible 32% in the same month on October 2007. So while our industry is hurting, its nowhere at the level that the US or Europe is.

Nor Japan for that matter as the head of Renault-Nissan told the Wall Street Journal this morning that Nissan’s second half profit (for the six months to March 30, 2009) would go to “zero” because of the slump in the US and Europe.

Holden is already taking a gloomy view of the first quarter of next year with reports today that it had cut 25 production days from its work schedule. That means it is seeing lower sales, a situation that will be compounded by the disappearance of financiers, GE Money and GMAC from the end of the year.

The Westpac – Melbourne Institute index of economic activity, which tries to project a view of the likely pace of future economic growth three to nine months out, was 1.1% in September, down from 3.5% in August.

Westpac chief economist Bill Evans said in a statement that the fall in the leading index was the biggest monthly drop since the mid 1980s.

“That represents the largest percentage point fall between two months since the mid-1980s – sharper even than we saw in the 1990/91 recession.”

The report said the leading index has now been below the long-term trend of 3.9% for two successive months and Mr Evans said the report showed a recession in 2009 was becoming more likely.

“The growth rate is signalling a very weak growth outlook through at least the first half of 2009,” he said.

“It is consistent with Westpac’s view that growth in the first half of 2009 will be barely positive with a decent risk that the first two quarters of growth in 2009 could be negative.”

“Underlying the final quarter of 2008 and probably most of 2009 will be a weak consumer as households deal with the unprecedented pressures on household wealth from the collapse in share prices and associated superannuation returns and some modest softening in house prices,” Mr Evans said in the statement.

“Household incomes will come under pressure from deteriorating jobs growth rising unemployment and falling deposit interest rates.”

Westpac expects interest rates to fall to 3.5% and expects a cut of 0.75% on December 2 when the RBA next meets. The RBA board left open the size of the cut in the minutes of the November 4 meeting which were released yesterday.

But a cut is coming.

Peter Fray

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