What’s in a (growth) number? Vehicle sales volumes in December 2016 deserve a closer look.
Recently reported new vehicle sales of 41 639 units sold in in December 2016, some 15.35% fewer than sold a year ago, were greeted with general disappointment. The implication drawn was that the decline in sales volumes recorded in 2016 had accelerated.
But is this the right conclusion to be drawn about the most recent data release? A year can be a very long time in economic life and what has happened to vehicle sales in the months between December 2015 and December 2016 can tell a very different story about the underlying trends.
The data, when adjusted for predictable seasonal influences on monthly sales, indicate that while monthly sales volumes took a turn for the worse in the fourth quarter of 2015, by the fourth quarter of 2016, sales were in fact recovering from their lows of midyear 2016, when monthly sales are adjusted for seasonal influences, as we show below.
The important feature of the vehicle market is that unlike for other retailers, December is a typically well below average month for motor dealers. Holidays mean closed dealerships and so are not usually a good time to deal for an expensive new vehicle.
But a year ago in December 2015, with which sales comparisons are being made, was not a typical month for the motor dealers. The rand, it will be remembered, collapsed that month, portending higher vehicle prices, given their import content. And consequently buying ahead of the expected price increases seemed like a good enough idea to lift sales in December 2015 markedly, especially when seasonally adjusted. Actual sales in December 2015 were 49 158 units and had held up very well compared to November 2015 sales volumes of 51 338 – making December 2015 a very high base with which to compare sales a year later.
As we show in our table of seasonal factors below November is an average month for motor dealers, while December sales average about 13% below average monthly sales. By contrast for retailers generally, December sales volumes average as much as 36% above average monthly volumes.
Or in other words, to gain a full impression of trading trends in December 2016, retail volumes when recorded and reported should be scaled down (divided) by a factor of 1.36 while vehicle sales should be scaled up by a factor of approximately (0.87). Hence vehicle sales in December 2016 of 41639 units should be scaled up by (0.866476) to register the 48 055 sales seasonally adjusted indicated in the figures, and so well ahead of the much weaker, seasonally adjusted sales of 42 501 unit sales, recorded in July 2016.
In the figure below we compare growth rates in vehicle sales on an annual basis with growth calculated over consecutive 3 moth periods using seasonally adjusted monthly data. It may be seen that while annual growth rates are negative and in retreat, the quarterly numbers tell a more positive story.
Of interest is that the recent share price performance of two JSE listed motor dealers, Combined Motor Holdings (JSE code – CMH) and Imperial (IPL) seems to accord better with the more encouraging seasonally adjusted sales numbers than with the raw data (see below).
