Canadian auto sales’ rebound “softened modestly” in August, report says
In the U.S., meanwhile, auto sales posted a fourth month of recovery with August purchases increasing by 5% month-over-month, the new report from Scotiabank says.
Canadian auto sales’ rebound softened modestly in August with a deceleration of -7% month-over-month (m/m) (sa) relative to last month’s exceptional rebound, a new report from Scotiabank says.
According to its latest Global Economics Auto News Flash, the seasonally adjusted sales rate for the month stood at 1.73 million units – described by the report as “still healthy for this early stage of recovery” – but lower than the exceptional 1.86 million (saar) units in July.
“Sales were down by -8.9% year-over-year (nsa) with year-to-date sales now at -27%,” the report said. “The Conference Board reported a modest pull-back in consumer sentiment in August, but the trend strength in the auto sales rebound remains.”
Given that fleet sales are still depressed, Scotiabank said, the retail sales rebound is even stronger, showing signs of not only pent-up demand, but also pandemic-motivated purchases. “The trend jibes with a stronger-than-anticipated GDP hand-off from the second-quarter, along with continued job growth recoveries across the country, while retail spending had already surpassed pre-pandemic levels in June,” the report said. “Though retail growth in July likely moderated, generous government transfers continue to provide a lift.”
New income supports recently announced – that will enable households to earn up to $38,000 per year before claw-backs start – will likely further underpin the recovery in auto sales into the Fall. “We maintain our sales forecast outlook at 1.6 million units for 2020 with some further upside from these new policy supports along with the stronger economic recovery profile, but still note considerable downside risks on the horizon, particularly south of the border,” Scotiabank said.
In the U.S., meanwhile, auto sales posted a fourth month of recovery with August purchases increasing by 5% m/m (sa) at an annualized pace of 15.2 million units.
“On a year-over-year basis, sales were down -19%,” Scotiabank said. “Activity was not sufficiently strong enough to nudge year-to-date sales which still stand at -22%.”
As COVID-19 cases continue to mount across the States and additional stimulus talks stalled, consumer auto purchase intentions deteriorated in August, the report said, nearly halving the gains accrued over the past three months, according to the Conference Board. But broader economic indicators are still driving actual purchases: weekly jobless claims have been trending modestly downward over the month of August, and U.S. housing starts and sales for July surged above consensus suggesting American consumers are still active.
“For both Canadian and U.S. markets, inventory remains another key challenge for dealers,” Scotiabank said. “Though North American auto production achieved positive year-over-year growth in July according to Ward’s Automotive, it still trails the rebound in demand, particularly for sought-after models, with tight inventory expected to persist through the Fall.”
Scotiabank’s latest report forecasts 14 million units for U.S. auto sales on the basis of early rebound activity, but also notes the substantial downside risks related to the course of the pandemic, the ability of Congress to pass additional stimulus, and election uncertainty.