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Cyclical recovery for automotive sector remains intact: Scotia Economics

The world’s automotive markets will see moderate gains this year, according to the a new automotive report by Scotia Economics


December 28, 2011
by The Canadian Press

TORONTO—The cyclical recovery in global auto sales that began in mid-2009 remains intact, although gains have moderated to five per cent this year from 12 per cent in 2010, according to a new Scotia Economics report.

“We expect a further four per cent advance in 2012, though there is the potential for more downside if the Eurozone debt crisis does not stabilize,” says Carlos Gomes, senior economist and auto industry specialist. “A rebound from this year’s tsunami-induced slump in Japan and continued gains in emerging markets will lead the way.”

Canadian sales are expected to climb to 1.61 million units in 2012, up from 1.59 million this year and the best performance since 2008, while sales in the U.S. are forecast to climg to 13.5 million units—its highest level since 2007.

“The resource-rich Prairies will lead the way, but every region is expected to post moderate gains in the coming year,” the report said.

Europe will remain the weak link, with volumes dragged down by declining sales in the debt-ridden Mediterranean countries, which could spread further north if the crisis is not contained.

But Gomes said global volumes would continue to be bolstered by strong employment growth and declining interest rates in emerging markets.

“This represents a sharp reversal from the past year, when most central banks in developing nations were raising rates to contain inflation,” he said.

After plunging by nearly 20 per cent this year and slumping to the lowest level since 1987, car sales in Japan are expected to post a double-digit increase in 2012, said Gomes.

Despite the improvement, the auto industry highlights the major shift taking place in global consumption patterns, the report said.

“In 2012, car sales in emerging nations will surpass purchases in the developed world for the first time on record,” Gomes said.

India was the second-best performing major auto market over the past decade, with sales climbing 11 per cent per annum to a record 1.97 million in 2011.

In Brazil, sales are expected to rise four per cent this year to a record 2.8 million units as interest rates have declined 2.5 percentage points from their August peak. About 70 per cent of car buyers in Brazil require financing.