New vehicle market still struggling: CommSec's Craig James

New vehicle market still struggling: CommSec's Craig James
Craig JamesDecember 7, 2020


The Australian Industry Group (AiGroup) Performance of Services Index (PSI) fell from 55.2 points to 53.7 points in November. The ‘final’ CBA/IHS Markit Services Purchasing Managers’ Index (PMI) fell from 50.1 points to 49.7 points in November. A reading above 50 indicates an expansion of services sector activity.

According to the AiGroup: “Among the business-oriented sectors finance & insurance reported positive results, logistics (wholesale trade, transport & storage) was stable, while business & property services contracted. Among the consumer-oriented segments ‘retail trade & hospitality’ and ‘personal, recreational and other services’ were positive (specifically, "robust growth"), while ‘health, education & community services’ contracted slightly.”

The CBA/IHS Markit November PMI data

“November data indicated that the decline in business activity occurred amid subdued demand conditions. New business intakes continued to increase at a marginal pace. The underwhelming sales trend was centred around the external market, with services exporters reporting a further reduction in international sales. Anecdotal evidence suggested that drought-related disruptions and global trade war impacts had dampened demand for Australian services.”

New vehicle sales

The Federal Chamber of Automotive Industries reported: The November 2019 market of 84,708 new vehicle sales is a decrease of 9,152 vehicle sales or -9.8 per cent on November 2018 (93,860) vehicle sales. November 2019 had the same number of selling days (25.7) as November 2018 and this resulted in a decrease of 356.1 vehicle sales per day

The Passenger Vehicle Market is down by 6,228 vehicle sales (-21.3 per cent) over the same month last year; the Sports Utility Market is down by 442 vehicle sales (-1.1 per cent); the Light Commercial Market is down by 1,835 vehicle sales (-8.8 per cent); and the Heavy Commercial Vehicle Market is down by 647 vehicle sales (-17.4 per cent) versus November 2018.

Sales across states and territories over year to November: NSW (down 9.1 per cent); Victoria (down 10.6 per cent); Queensland (down 10.7 per cent); South Australia (down 14.9 per cent); Western Australia (down 0.8 per cent); Tasmania (down 9.5 per cent); Northern Territory (down 20.7 per cent); ACT (down 14.7 per cent).

The biggest selling vehicle in October was the Toyota Hi-Lux (3,687) from Ford Ranger (3,491) and the Mitsubishi Triton (3,123).

The rolling annual total of new vehicle sales in November was 1,066,156, down 8.8 per cent on the year – the biggest annual decline in a decade (year to November 2009). Passenger car sales fell by 17.4 per cent on the year with SUVs down 3.4 per cent and “other vehicles” down 6.6 per cent.

In the year to November, SUVs accounted for a record 60 per cent of combined SUV and passenger vehicle sales.

What are the implications for interest rates and investors?

The Reserve Bank is now in ‘monitoring mode’ until the February 2020 Board meeting.

The new vehicle sales market is still not showing the benefit of tax cuts, low interest rates or higher home prices – at least not yet. Auto-dependent businesses will continue to face short-term challenges but 2020 is looking more positive

CRAIG JAMES is the Chief Economist at CommSec

Craig James

Craig James is the Chief Economist at CommSec, interpreting ‘big picture’ economic and financial trends.

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