“Although the actual number of passenger vehicles sold, at 35, 355, is still comfortably above the 2008 and 2009 recession lows, the growth rate has slowed sharply,” Investec said in a statement.
“In aggregate, passenger vehicle sales contracted by 8.5 per cent in the second quarter of 2014, whereas sales decreased by 5.0 per cent year on year in the first quarter of 2014. On a comparative basis, this translates to a decrease of 9,212 units from the number of vehicles sold in the second quarter of 2013.”
(WATCH VIDEO: S.Africa's Q1 2014 new vehicle sales down 9.2 per cent)
Commercial vehicle sales growth grew by 5.3 per cent year on year, versus a contraction of 3.0 per cent year on year previously.
Passenger vehicle sales, according to Investec, are considered to be a leading indicator for household consumption expenditure. The pervasive underperformance in the vehicle market therefore signals a further decrease in consumption.
“Other contributing factors to the contraction in passenger vehicle sales growth have been the increase in new vehicle prices, and the slowdown in the rate of credit extension to households. Specifically, past rand weakness boosted new vehicle price inflation to 7.6 per cent year on year in May 2014 from the average rate of inflation of 3.8 per cent in 2013,” Investec explained.
Instalment credit growth moderated to 10.0 year on year in May from rates closer to 20.0 per cent year on year at the start of 2013.
Infrastructure activity helped support the performance of commercial vehicle sales for the period, but the dull rate of private sector investment and supressed business confidence is expected to dampen the performance of light and medium commercial vehicle sales.
(WATCH VIDEO: S.Africa new vehicle sales down 9.2 per cent)
Despite and to the five-month platinum strike, the current challenging macroeconomic environment could result in a decline in the domestic market by roughly 3.5 per cent.
“The interest rate hike in January has already served to dampened business and consumer confidence, which does not bode well for future investment and consumption,” said Investec.
“In view of the deterioration in economic growth metrics, and of the South African Reserve Bank forecasting a return of inflation into the target band in 2015, the reserve bank has the room to normalise interest rates at a very gradual pace. We expect an increase in interest rates of 25 basis points, only in the fourth quarter of 2014.”