Belfast Telegraph

'Warning light flashing' for Northern Ireland consumer spending as new car sales stuck in reverse gear

By John Mulgrew

A slump in new car sales in Northern Ireland is a "flashing warning light" for consumer spending, it has been claimed.

New vehicle sales here dropped by 3.7% in June, a slower rate of decline than elsewhere in the UK.

There were 5,721 new sales last month. That's down from 5,938 in the same period in 2016, according to the Society of Motor Manufacturers and Traders (SMMT).

And across the year so far, sales are down 5.4%.

While changes in duty meant buyers here made purchases earlier in the year, the "new tax year also heralded the start of a multi-year period of benefit freezes", according to Ulster Bank chief economist Richard Ramsey.

"New car sales are often viewed as a barometer of consumer confidence," he said.

"However, changes to taxation can distort consumer behaviour.

"The introduction of new vehicle excise duty (VED) rates has had a similar effect on car sales in 2017.

"Looking beyond the distortionary effects of the VED changes reveals that the underlying trend in new car sales appears to be one of decline too.

"2015 and 2016 were uneventful years for new car sales (broadly flat) despite the favourable inflationary and consumer environment. 2017 looks set to be even weaker."

It was the Volkswagen Golf that topped sales in Northern Ireland in June, with 264 vehicles sold.

The Mini came in second with 177, followed closely behind with the Ford Fiesta on 176.

Across the UK, sales were down 4.8% in June.

"Households will increasingly feel the inflationary squeeze on both earned and unearned income," Mr Ramsey said.

"The latest SMMT new car sales data for Northern Ireland can be viewed as a flashing warning light for consumer spending."

He added: "Against the unfavourable consumer environment, we can perhaps expect new car sales to be stuck in reverse gear for some time yet."

Just over 243,000 new cars were registered in June, down 4.8% on the same month last year, across the UK.

Some 1.4 million cars have been sold so far this year, down 1.3% on the same period in 2016.

The SMMT said the market is "in line with 2017 forecasts" following a record first three months of the year.

Many buyers brought orders forward to March, ahead of VED rates coming into force.

SMMT chief executive Mike Hawes said: "As forecast, demand for new cars has started to cool following five consecutive years of solid growth, but the numbers are still strong and the first half of the year is the second biggest on record.

"Provided consumer and business confidence holds, we expect demand to remain at a similarly high level over the coming months."

Demand for new diesel cars dropped by 14.7% last month, while petrol rose 2.5% and alternatively fuelled vehicles (AFVs) were up 29%.

AFVs took a market share of 4.4% in June, compared with 3.2% during the same month in 2016.

Mr Hawes said: "It's encouraging to see alternatively fuelled vehicles experiencing rapid growth, but adoption is still at a relatively low level and more long-term incentives are required if this new generation of vehicles is to be a more common sight on British roads."

Belfast Telegraph

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