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Falling Eurozone car sales undermines economic confidence

As sales figures for new cars across the EU slump to a record low, questions are being raised about the recovery of the Eurozone economy. The UK was the only major European country to see an increase in sales last month, recording a rise of nearly 11%.

As sales figures for new cars across the EU slump to a record low, questions are being raised about the recovery of the Eurozone economy. The UK was the only major European country to see an increase in sales last month, recording a rise of nearly 11%. This contrasts sharply with the rest of the EU, where sales dropped by 5% against August 2012. Sales for 2013 to date are the lowest since the European Automobile Manufacturers' Association (ACEA) started to collect the data in 1990. Unless there is an unexpected swing, 2013 will be the sixth year in a row of declining sales.

The decline in new car sales underlines the lack of confidence experienced by consumers and is more pronounced in some countries than others. Worryingly, the major EU economies of France, Germany and Italy have seen some of the steepest declines. Unsurprisingly, Cyprus was one of the countries worst affected, with sales dropping by 40%. Certain car brands are also experiencing a steeper than average decline. Peugeot Citroen (PSA) for example, saw an 18% fall in sales, while the VW group's sales dropped by 11%.

Some analysts, though, are beginning to see light at the end of the tunnel. IHS automotive analyst, Mark Fulthorpe, commented: The general sense we get is that we are now bumping along the bottom. At least in the car market, the rate of decline has slowed. There have been some positive developments in France and Germany in recent months, but not enough to offset problems in the periphery but we may get a more neutral picture ahead."

In both the US and UK, it seems that an increase in car sales came before a general upswing in the economy and Fulthorpe believes that the same pattern could be repeated in Europe: "The age of vehicles on the road is increasing and servicing costs and repair costs for older vehicles will give many drivers reason for a newer car when consumer confidence returns at all. That has been the impetus for the turnaround we've seen in the American market, where many purchases were deferred in the darkest days of the crisis. It's only in last few weeks that commentators in the UK have really thought that the economy has turned, but you can see from the last year's figures that people were already making those big-ticket purchases here."

In the UK, that sales growth is being put down to increasing consumer confidence and better availability of finance for new car purchases.

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