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Auto Sector Slowing in North America
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Automakers have reduced third-quarter North American production schedules by eight per cent over the past three months, alongside slowing U.S. sales and bulging inventories. Cutbacks will continue in the fourth quarter and in 2007, as the macroeconomic backdrop continues to weaken, according to the latest Global Auto Report released by Scotia Economics. They feel about .5 percent will be reduced from the overall production of GDP with the weakening auto industry, a component of the manufacturing section.
North American vehicle production is set to total an annualized 15.8 million units in the third quarter, down from an average of more than 17 million in the first half. Output will move even lower in the fourth quarter, slumping to an annualized 15.2 million units - the lowest level since the economic downturn of the early 1990s. Light truck production will lead the decline, tumbling more than 13 per cent, year over year, in the final months of 2006. This means that industry profitability will deteriorate further in
late 2006. (As of June, the traditional Big Three were already losing more than US$330 per vehicle sold in North America.)
Slowing U.S. sales are the main culprit for the production cutbacks. U.S. purchases weakened to an annualized 16.0 million units in August - the lowest level since November 2005 - and down from an average of 16.6 million units between January and July. Volumes were undercut by a seven per cent fall-off in light truck sales at the traditional Big Three. In contrast, overall car sales advanced three per cent year over year, as consumers continue to shift away from large, gas-guzzling pickups and SUVs.
On the other hand in Canada, vehicle purchases posted a late-inning sprint in late summer, climbing eight per cent above a year earlier and setting a record high for an August. We estimate that purchases totalled an annualized 1.75 million units in August, up from an average of 1.59 million year to date through July. The increase likely reflects enhanced incentives and gains in Western Canada - especially Alberta, where volumes have surged by 12 per cent so far this year. Double-digit gains in Alberta have more than offset weaker sales in most other regions, lifting Canadian vehicle sales by 0.4 per cent through August.
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Barry
Mr. Do It All
Oct 7, 2006, 2:35 PM
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