Last week’s post looked at the most expensive asset most of us will ever buy: property. This week we’ll take a look at vehicle sales and what they tell us about the economy as a whole.
Cars, bakkies and trucks are expensive. For most of us consumers, after our houses, vehicles are the most costly purchases we’ll ever make. For businesses, purchasing new delivery trucks and other vehicles is not necessary unless business is going well.
So if consumers and companies are buying, chances are they’re optimistic about their economic futures. Conversely, if people are worried about losing their jobs, or businesses expect sales to slow, they’ll likely hold off on buying. As a result, new vehicle sales are a pretty good leading indicator for economic slowdowns.
Economists and investors around the world have long recognised this fact and a host of organisations track and report new vehicle sales on a regular basis. The release of this data is often a market-moving event.
Here in South Africa, new vehicle sales are tracked and analysed by the National Association of Automobile Manufacturers of South Africa (Naamsa). The key with new vehicle sales is to look for trends. If sales decrease consistently, the economy is probably heading into a slow patch. If sales are picking up, the economy might be improving.
How does this indicator work?
At the end of each month, Naamsa surveys all automotive manufacturers operating in South Africa to determine the number of vehicles that they sold in that month. Companies report their sales across six categories:
- Passenger cars
- Light commercial vehicles
- Medium commercial vehicles
- Heavy commercial vehicles
- Extra heavy commercial vehicles
- Buses greater than 8 500 kg
Naamsa collects, tabulates and analyses the responses they receive and posts “flash results” to their website. For each of the six categories, Naamsa reports the number of vehicles sold by each manufacturer as well as the total number of vehicles sold.
For example, last month, Naamsa reported that 34 187 passenger cars were sold in South Africa, 1 203 fewer than in January. Volkswagen sold the most cars, accounting for 23% of all passenger car sales, followed by Toyota, which accounted for 14% of total sales. Maserati sold two cars. No one bought a Hummer.
Along with the actual numbers, Naamsa posts commentary which helps to put the figures in context. Last month’s write-up, for example, concluded that, “The outlook for 2012 in terms of total industry sales remained one of modest growth.”
How do I use this indicator?
“New vehicle sales are a good indicator of overall economic activity,” says Sydney Soundy, managing executive of Absa vehicle and asset finance. “The motor industry is among the first to respond to changing conditions.”
Declining sales tend to foreshadow recessions. Heading into recovery, sales begin trending upwards as consumer confidence returns. So “trace trends over time”, he says. These trends have implications for car manufacturers, exporters, importers and dealers as well as suppliers and insurance companies.
Looking beyond the headline numbers is also important. Movement within the various segments provides valuable information. “The new car segment is the first to see upward momentum. The heavy truck sector is the last,” explains Nico Vermeleun, Naamsa’s director.
Examining each segment’s data also provides useful information about different sectors of the economy. “Car sales are closely linked to consumer confidence, light commercial vehicle sales are closely aligned to overall economic levels and business confidence,” says Vermeulen, “and fixed investment expenditures [by business] drives heavy vehicles.”
When and where do I find this indicator?
Headline figures for new vehicle sales are extensively reported in the press during the first week of each month. Naamsa publishes full “flash results”, preliminary estimates as well as analysis and commentary on their website (www.naamsa.co.za).
Author
A prince with dignity and determination
Prince Ngarambe’s goals are to become Rwanda’s first transgender model and to uplift the country’s youth
The EFF’s principles are unshakeable
Unlike the ANC, the core values of the freedom fighters do not change with each leader it elects
