South African new vehicle sales declined by 3% to 58 040 units year-on-year in August as higher interest rates weigh on the passenger car sector, data showed on Tuesday.
This was the fifth consecutive month of lower sales, but the National Association of Automobile Manufacturers (Naamsa) said the August figure was only slightly down on the record sales for the same month last year. ”The performance of the new passenger car market in August, 2007 was more in line with underlying economic fundamentals,” Naamsa said in a statement, adding more interest rate hikes would continue to dampen spending.
”The further half a percent increase in interest rates during August 2007 and upward pressure on new vehicle prices at a time of record household debt in South Africa will continue to reinforce the softer trend in new car sales.”
New passenger car sales — generally the most affected by interest rates increases — declined by 1 484 units, or 3,8 percent, to 37 719 units compared to the same period last year.
South Africa’s central bank has raised interest rates by a total of 300 basis points since June 2006 in a bid to tame inflationary, credit-driven consumer spending.
Some economists say another increase could be in the offing when its monetary policy committee next meets in October, after targeted CPIX inflation stayed above a 3% to 6% range for the fourth straight month in July.
Naamsa said, including previously uncounted sales from Associated Motor Holdings company, total sales were 63 861 vehicles in August. Aggregate sales for the first eight months of 2007 were 1,8% lower than the same period last year.
Analysts say vehicle sales have also been dampened by a credit law introduced on June 1 making it more difficult for consumers to get credit.
Naamsa added demand for new commercial vehicles remained fundamentally strong in contrast to passenger car sales, as economic activity levels had continued to benefit from infrastructure-spending programmes and strong investment sentiment.
”For the remainder of 2007, the industry’s performance would depend on the overall momentum of the South African economy, the direction of interest rates and new vehicle price trends,” it said. ‒ Reuters