How car parks can show if economy is in the right gear
London used to have the Cappuccino Index to gauge which areas where on the up and which were on the down - the sudden availability of froth-topped, good quality Italian coffee was seen as a solid indication of an imminent middle-class presence in an area (and therefore an indicator of likely house price rises).
The Economist magazine had its Big Mac Index to compare exchange rates - as Big Macs internationally are broadly the same, differing prices in different countries showed the gap in how currencies are valued. For me, a bit of 'carparkonomics' is a very useful way to gauge how the economy has been performing. What people have been buying to get themselves from A to B - the size, brand, price and country of origin - can tell us a lot about everything from the strength of the Korean Won to the price of a barrel of Brent Crude. In this vein, I did some research into what has been happening in the sports utility vehicle market in Northern Ireland, and indeed found some useful nuggets within the SUV Index. In short, we have gone SUV mad - although 2009 was the low point for sales of these vehicles. Since then, we have seen a 115% increase, and an 80% increase in the past three years. This tells us, amongst other things, that consumers have become more confident as the recovery has continued. It also tells us that there has been a significant consumer recovery in the past few years as the cost of living crisis has waned, inflation has fallen, and wage rises have started to come through. And it points to the fact that manufacturers have been capitalising on consumer demand for SUVs by making them in a variety of shapes and sizes to suit a range of budgets.
Overall, carparkonomics is so useful because consumer spending accounts for roughly two-thirds of economic activity, and after a new house, purchasing a new car is the biggest expenditure item most people make. Therefore the overall volume of new cars sold is a good barometer of consumer confidence. So what do new car sales last year tell us?
While 2015 was not a great year for global growth, new car sales have never been higher. They hit record highs in both the US and the UK in 2015. Meanwhile, the world's largest car market, China, helped drive new car sales to record highs, with a boost in Chinese sales provided by a temporary tax cut. Emerging markets outside China have not fared so well. Ahead of this summer's Olympics in Rio de Janeiro, Brazil saw new car sales slumped by 40% in 2015. Meanwhile Russia has seen sales plummet by 46%. It seems that some of the Brics (the emerging national economies of: Brazil, Russia, India, China and South Africa) have hit the skids.
Northern Ireland has been relatively pedestrian by comparison. Mirroring the wider economic picture, Northern Ireland continues to trail in the UK new car sales market's dust. Overall, the local market was flat last year, and less than half of the drop in new car sales has been recouped so far. While UK sales volumes are 10% above the pre-recession high, NI's new car sales are still 17% below 2007's peak. Beneath Northern Ireland's headline new car sales figures, there are contrasting fortunes at a brand level, and this tells its own story of a two-tier recovery in which some people are doing very well. For example, the premium market (which includes: Audi, BMW, Jaguar, Land Rover, Lexus, Mercedes, Porsche and Volvo) posted growth of almost 8% in 2015. Conversely, the non-premium brands saw sales drop by 2%. Indeed, 95% of the drop in sales that occurred amongst the premium brands in 2008 and 2009 has been recovered so far, whilst the non-premium brands have recovered just 40%. The premium brands have more than doubled their market share over the last 16 years from one in every 13 cars sold to one in every six. This compares with one in four within Great Britain.
Within the premier brand range, 2015 proved to be a record year for Audi, Mercedes-Benz and Land Rover. Sales of Porsche (+55%), Lexus (+39%) and Jaguar (+28%) accelerated last year too, with sales hitting their highest levels since 2007. Meanwhile a 5% rise in BMWs took sales to a seven-year high.
One noticeable consequence of the economic downturn and cost of living crisis has been the ageing of our vehicle stock. In 2007, the average age of cars in Northern Ireland was 4.6 years, two years younger than in GB. 45% of all Northern Ireland vehicles were less than four years old. However, fast forward to 2014 and the average age is 7.7 years (in line with the GB average) and just 25% of vehicles are less than four years old. Furthermore almost 20% of cars are over 10 years old - two-and-a-half-times the rate that prevailed in 2007. A legacy of people who skipped a car change - or went for second-hand rather than new - due to the economic downturn?
We've also seen our carparks become a little more Korean and German and a little less French and Japanese as tastes have changed, exchange rates moved, and some manufacturers have responded to economic conditions better than others.
So the next time you want to get a handle on consumer confidence and economic activity, forget the spreadsheets and Bank of England Monetary Policy Committee minutes - head down to the car park instead.