Naamsa released its new units sold statistics for May 2011 yesterday. The numbers are not encouraging. April 2011 was a poor month for sales, especially when compared to sales in March 2011, and the fall off in monthly sales, when seasonally adjusted, continued in May as we show below.
The sales quarter to quarter and seasonally adjusted have fallen sharply from a very strong March 2011 as we also show. The growth in sales is now barely positive, compared to a year ago, which is a long time in the motor dealing business, and in fact negative on a three month moving quarterly basis as may also be seen.
Making the seasonal adjustment for two months with an unusual number of public holidays, including the Easter holidays that fell in April, has no doubt complicated the analysis of the underlying cyclical trend. Holidays are good for shopping malls but not vehicle show rooms. Also adding complexity are disruptions in the supply chains that start North of Tokyo. Is it a relative lack of demand or an inability to supply that is holding back sales? The Naamsa explanation quoted below appears to attach some (though not major) importance to negative supply side forces.
“..During May, 2011 – constraints on the availability of components from Japan impacted on the production of certain product lines in South Africa and, together with shortages of various models sourced from Japan, this would have contributed to the slow down in the rate of growth in the new car and light commercial vehicle sales cycle for the month. These factors would also have contributed to lower aggregate industry exports. It was anticipated that the supply position would normalize over the medium term..”
Our own interpretation is that the peak of the vehicle cycle has been reached and the growth trend is now a significantly lower one. The market for new vehicles seems to be stabilising at a monthly pace of approximately 47 000 new units sold, well below the heady pace of 60 000 units sold at the peak of the previous motor vehicle cycle of early 2007. That is to say, year on year growth in December 2011 on December 2010 will be about 5%.
The current and projected level of vehicle sales help confirm our impression of an SA economy that is growing satisfactorily, but that the growth is not accelerating. There would appear to be no danger of excess demand materialising any time soon.
The economy, on the basis of these May vehicle sales and the April credit, money supply and house price data, appears to be taking longer to reach its growth potential than previously thought. Moreover the risks have increased recently that the global economy will not support export volumes and prices strongly enough to help take up the slack in domestic demand over potential supply. The danger of a global slowdown has risen in response to signs of slowing rather than accelerating growth in the US. The case for higher interest rates in SA, in the light of domestic vehicle sales and exports of vehicles, has weakened further.
To view the graphs and tables referred to in the article, see Daily Ideas in todays Daily View: Daily View 3 June: Vehicle sales: Not much vroom