Motor vehicle sales were mostly unchanged in February but the mining and manufacturing sectors continue to weigh on sales of commercial vehicles. Motor vehicle sales are likely to subtract modestly from consumption growth in the March quarter.
Motor vehicle sales were largely unchanged in February compared with January and are now 3.5 per lower over the year. Sales have been on a downward trend over the past twelve months.
Passenger vehicles rose by 0.8 per cent in the month, offsetting weakness in the sales of SUVs and commercial vehicles. However, passenger vehicle sales in January and February are down 1.9 per cent compared with the December quarter average.
As a result, motor vehicle sales – which account for around 2.4 per cent of household consumption – could reduce household consumption growth by around 0.05 percentage points in the March quarter. But with retail sales growth so strong in January and February, household consumption will not miss a beat.
At first glance it seems that the depreciation in the Australian dollar may have contributed to the slowdown in sales, since around 90 per cent of new Australian motor vehicles are imported from abroad. But this proposition doesn’t stand up to scrutiny, with CPI data indicating that motor vehicles became more affordable over 2013.
Commercial vehicles have declined sharply in Victoria, Queensland and Western Australia over the past year. This likely reflects the slowdown in mining for Queensland and Western Australia and uncertainty surrounding the long-term viability of manufacturing in Victoria.
Passenger vehicles however are likely to be driven by conditions in the broader economy. While retail spending has certainly been strong, consumer sentiment measures point towards a household sector that is still a little cautious. Households might be willing to spend heavily on smaller and relatively cheaper retail products but are more reluctant to make big-ticket purchases such as motor vehicles.
The near-term outlook for the motor vehicle sector will be determined by the Australian dollar – will it begin to fall or will the recent upward momentum continue? – combined with labour market conditions across the country.
At the state level, growth in Victoria, South Australia and Western Australia was mostly offset by weakness in the other states. New South Wales is the only state where sales are higher over the year, with Western Australia particularly weak and Victoria declining rapidly since November.
The highest selling car of the month was the Mazda3 (3,969 sales) followed by the Toyota Hilux (3,348) and the Toyota Corolla (3,322). The classic Australian favourite, the Commodore, finished in fourth place. Toyota was the top selling brand in February.
Motor vehicle sales should only be a minor concern for readers. With retail sales so strong it would not be wise to place too much weight on something that accounts for only 2.4 per cent of household consumption. But we should keep an eye on the data – if the recent momentum in the economy does begin to stagger the highly cyclical motor vehicle sector will be one of the first areas to show weakness.