New Car Sales Record Longest Growth Since The 1950s
According to figures from the Society of Motor Manufacturers and Traders (SMMT), Britons bought 194,032 new cars in May. This was up by 7.7% on the same month last year and made 27 months in a row of sales growth; the longest period of growth since 1959.
According to figures from the Society of Motor Manufacturers and Traders (SMMT), Britons bought 194,032 new cars in May. This was up by 7.7% on the same month last year and made 27 months in a row of sales growth; the longest period of growth since 1959. The figures also represented the best May sales performance for ten years. The impressive figures are thought to be down to the economic recovery, which is in turn boosting consumer confidence. Just as importantly, car companies have been quick to leverage the availability of cheap finance, often offering new car deals tied to personal leasing terms. Some observers have also pointed to the payouts associated with PPI loan insurance miss-selling, which it is thought are being used for car deposits.
Chief executive of SMMT, Mike Hawes, said: "The new car market has now grown in every month since March 2012; the longest period of growth on record and a reflection of the UK's ever-improving economic conditions." New car registrations in the UK soared passed 1 million in May, reaching a total of 1,059,000, which is up nearly 12% on 2013 figures. The bestselling car during May was Ford’s Fiesta, with the VW Golf second and the Vauxhall Corsa in third place.
Mr Hawes suggested that new car technologies and better fuel economy, in addition to cheap finance deals, were attracting motorists back into the showrooms; making new cars more affordable and cheaper to run than older models. He did, however, warn that the current rate of growth would not be sustained. It is likely, instead, that demand will stabilise in the coming months and growth will slow. The SMMT is predicting a 6% increase in new cars sales for 2014 as a whole.
The CBI has suggested that the British economy is the healthiest it has been for more than a decade. It has also joined the SMMT in confirming that consumer confidence is at its highest for nine years. In a survey of retailers and service sector companies, figures from the CBI showed that the economy was growing faster than at any other time since records began in 2003. Katja Hall, deputy director-general of the CBI, said: "The UK economy is performing strongly thanks to rising business and consumer confidence, better credit conditions at home and improving global economic conditions. What's encouraging is that growth is becoming more broad-based, with solid increases in business investment over the past year. This bodes well for the year ahead."
The positive news on the economy was reflected in results from the GfK consumer confidence index. This increased by three points in May to reach 0. This modest sounding figure is more impressive when it is realised that the index rarely records a positive figure and it is the first time the index has moved out of negative numbers since 2005. The British Chambers of Commerce (BCC) also raised its forecast for UK economic growth from 2.8% to 3.1%, in what would be the strongest economic growth since 2007. The BCC also issued a warning, however, suggesting that rising interest rates next year would put UK households under increased financial pressure, potentially impacting sales figures of major items, including cars.
A treasury spokesman said: “Today's reports from the British Chamber of Commerce, Confederation of British Industry, and GfK provide further evidence that the government's long term economic plan is working, delivering economic security for hardworking people. Coming alongside last week's strong growth and investment numbers, today's figures show that the foundations for a broad based recovery are now in place.”
The BCC has urged the Bank of England to keep interest rates at their historic 0.5% low for as long as possible, amid suggestions that a rates rise is imminent. Bank of England deputy governor, Charlie Bean, confirmed the intention to gradually increase rates, saying: "There is an argument for trying to move cautiously in baby steps, if you take large steps there is a greater likelihood of getting it wrong.”
Clearly, increasing interest rates would impact the cost of finance packages and in turn could potentially depress future car sales.