THE UK passenger car market opened its account for 2018 with a decline, falling in January by 6.3% y/y according to the latest data published by the Society of Motor Manufacturers and Traders (SMMT), writes IHS Markit analyst Tim Urquhart (left).
Registrations fell from 174,564 units to 163,615 units.
Registrations by private customers were a big drag on performance, with sales falling 9.5% y/y to 69,416 units.
However, fleet registrations dipped by 1.8% y/y to 89,513 units.
Furthermore, business registrations tumbled by 29.7% y/y to 4,686 units.
Outlook for the UK car market
After a couple of years of record sales the January market decline certainly indicates that the growth in the UK market is for now over.
Although anticipated by IHS Markit, it has taken place during a period in which the economy has lost some momentum and is set to face further struggles. We expect domestic demand to remain soft through 2018. In particular, consumer spending growth is expected to come under further pressure as purchasing power is sharply diluted and labour markets are likely to start to soften soon.
Furthermore, according to our January forecast, consumer price inflation is forecast to average 2.9% in 2018, and earnings growth is seen limited by companies clamping down on workers’ pay to contain costs in a challenging environment.
Weakened confidence and labour market slack will dilute workers’ ability and willingness to push for pay increases, despite higher inflation. Business confidence also remains under pressure with the UK in the process of negotiating its departure from the European Union (EU). This has heightened caution in capital expenditure, and to a lesser degree, employment.
Reduced growth prospects will dilute the need for companies to invest to add capacity. Nevertheless, the desire/need to boost productivity will provide some incentive for business investment.
For the full-year IHS Markit is forecasting that West European sales will stagnate in 2018, rising only very marginally to 14.4 million units.