South African new vehicle sales declined by 1,7% year-on-year in May and the sector’s short-term outlook could be undermined by possible interest-rate rises.
The National Association of Automobile Manufacturers (Naamsa) said on Monday 51 684 new units were sold in May compared with 52 574 the same month last year.
Including sales from the Associated Motor Holdings company, total sales were 57 339 vehicles in May.
While the general economic outlook remained largely positive, recent negative economic developments clouded the short-term outlook for the new vehicle market, including higher-than-projected April consumer and producer inflation data, Naamsa said.
Rapid growth in M3 money supply and private credit demand growth, as well as a deteriorating trade deficit, were also likely to lead to further interest-rate increases.
”This would further moderate consumer demand and lead to further consolidations, specifically in new car sales,” NAAMSA said, adding, however, that new commercial vehicle sales should remain strong.
The central bank left its repo rate at 9% in February and April after hiking it by two percentage points last year to curb rising inflationary pressures and high consumer spending.
But analysts say the Reserve Bank will be hard pressed not to increase rates on June 7 after official data last week showed the targeted CPIX (consumer inflation less mortgage costs) inflation gauge spilling outside the central bank’s 3% to 6% range in the year to April at 6,3%.
In an analyst note, Standard Bank said May vehicle sales figures could also have been hit by some individuals postponing purchases to take advantage of a more affordable vehicle payment system legislated by a new Credit Act.
”What is encouraging to note, however, is that the number of vehicles sold remains above the already buoyant 2005 levels even though moderating from last year’s successive record figures,” said Standard Bank economist Danelee van Dyk. — Reuters