CANADA: REBOUND IN SALES THAT REMAIN VOLATILE MONTH-TO-MONTH
Canadian auto sales increased 3.5% m/m (SA) to 1.84 mn units at a seasonally adjusted annualized rate (SAAR) in October according to Wards Automotive (chart 1).
This was the biggest monthly increase since July, when vehicle sales rebounded from June’s recent seasonally adjusted low that were likely negatively distorted by the CDK disruption.
While seasonally adjusted vehicle sales slowed over the summer, October’s rebound has brought the three-month moving average (3mma) back up to 1.8 mn (SAAR) units. However, given the volatility of vehicle sales from month-to-month, growth in the sales rate is likely to remain muted in the near term while we keep an eye out for persistent change in the trend of Canadian vehicle sales.
The Bank of Canada cut the policy rate by 50 basis points (bps) in October, lowering the policy rate to 3.75%. The larger-than-usual cut was supported by the continuing decline in annual inflation which eased to 1.6% year-over-year (y/y) in September, while job growth remains positive but lower than last year, as the unemployment rate held steady at 6.5% in October.
Our outlook for Canadian new light vehicle sales is 1.78 mn in 2024, and 1.8 mn in 2025 as interest rate headwinds ease. However, as we enter a period of uncertainty relating to the outlook, we will be monitoring the implications for the automotive sector over time.
UNITED STATES: HIGHEST SALES RATE SINCE APRIL AMID SIDEWAYS TREND
US auto sales increased 1.7% month-over-month to 16.0 mn (SAAR) units in October, the highest seasonally adjusted sales rate since April 2024 (chart 2).
October’s sales rate was the highest in seasonally adjusted terms since April earlier this year, bringing the trend in automotive sales rate back up to 15.7 mn (SAAR, 3mma) units. US light vehicle sales have generally been moving sideways since June 2023.
With the generally steady sales rate, albeit volatile from month-to-month, US light vehicle inventories as reported by Wards Automotive have increased in 29 of the past 32 months but declined in two of the last three months when adjusting for seasonality. North American light vehicle production averaged 15.4 mn (SAAR) units in Q3-2024, down from both the previous quarter, 16.2 mn (SAAR) in Q2-2024, and the same quarter a year ago, 15.8 mn (SAAR) in Q3-2023, as supply recovered into pent-up demand that was facing uncertainty due amid economic headwinds.
The US Federal Reserve further lowered the policy rate by 25 bps to 4.75% at the November 6-7 FOMC meeting. Annual inflation continued to ease to 2.4% y/y as of September 2024, but pressures on core inflation which increased by more than 3% m/m at an annualized rate the past two months along with slowing, but still positive, job growth and the unemployment rate unchanged at 4.1% in October were some of the contributing factors for the Fed to lower the policy rate, however the size and pace of further easing remains uncertain.
Our outlook for US new light vehicle sales is 15.6 mn in 2024, and increasing to 16.5 mn in 2025 as interest rate headwinds ease. As we enter a period with greater policy uncertainty around the outlook, we will be monitoring the implications for the automotive sector.
GLOBAL AUTO SALES: SALES IMPROVE AT THE END OF A SOFT Q3-2024
Global auto sales increased 1.9% m/m (SA) in September, driven by growth across most of the regions covered (chart 3). Global vehicle sales in Q3-2024 were down -2.1% q/q (SA) as softness in the western European and Asian regions more than offset growth in eastern Europe and Latin America, while North American vehicle sales were mostly unchanged.
Western European auto sales increased 3.3% m/m in September, however softer seasonally adjusted sales the two months prior resulted in Q3 sales declining -6.4% q/q (SA). Conversely, eastern European auto sales declined -5.0% in September after having increased the two months prior, with auto sales increasing 1.5% q/q (SA).
In the Asia Pacific region, seasonally adjusted auto sales increased for a second consecutive month, up 2.2% m/m (SA) in September, aided by growth in Chinese vehicle sales (3.3% m/m SA) which accounts for approximately two-thirds of regional sales. However, the rebound in vehicle sales was from a slower sales rate at the beginning of the quarter resulting in a decline of -2.8% q/q (SA) in Q3.
Auto sales in Latin America were roughly unchanged (0.1% m/m SA) for a second consecutive month in September, but quarterly levels were up 3.8% q/q (SA) in Q3.
Our outlook for global vehicle sales is 2.0% in 2024 and 3.3% in 2025 (chart 4).
DISCLAIMER
This report has been prepared by Scotiabank Economics as a resource for the clients of Scotiabank. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Scotiabank nor any of its officers, directors, partners, employees or affiliates accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents.
These reports are provided to you for informational purposes only. This report is not, and is not constructed as, an offer to sell or solicitation of any offer to buy any financial instrument, nor shall this report be construed as an opinion as to whether you should enter into any swap or trading strategy involving a swap or any other transaction. The information contained in this report is not intended to be, and does not constitute, a recommendation of a swap or trading strategy involving a swap within the meaning of U.S. Commodity Futures Trading Commission Regulation 23.434 and Appendix A thereto. This material is not intended to be individually tailored to your needs or characteristics and should not be viewed as a “call to action” or suggestion that you enter into a swap or trading strategy involving a swap or any other transaction. Scotiabank may engage in transactions in a manner inconsistent with the views discussed this report and may have positions, or be in the process of acquiring or disposing of positions, referred to in this report.
Scotiabank, its affiliates and any of their respective officers, directors and employees may from time to time take positions in currencies, act as managers, co-managers or underwriters of a public offering or act as principals or agents, deal in, own or act as market makers or advisors, brokers or commercial and/or investment bankers in relation to securities or related derivatives. As a result of these actions, Scotiabank may receive remuneration. All Scotiabank products and services are subject to the terms of applicable agreements and local regulations. Officers, directors and employees of Scotiabank and its affiliates may serve as directors of corporations.
Any securities discussed in this report may not be suitable for all investors. Scotiabank recommends that investors independently evaluate any issuer and security discussed in this report, and consult with any advisors they deem necessary prior to making any investment.
This report and all information, opinions and conclusions contained in it are protected by copyright. This information may not be reproduced without the prior express written consent of Scotiabank.
™ Trademark of The Bank of Nova Scotia. Used under license, where applicable.
Scotiabank, together with “Global Banking and Markets”, is a marketing name for the global corporate and investment banking and capital markets businesses of The Bank of Nova Scotia and certain of its affiliates in the countries where they operate, including; Scotiabank Europe plc; Scotiabank (Ireland) Designated Activity Company; Scotiabank Inverlat S.A., Institución de Banca Múltiple, Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Casa de Bolsa, S.A. de C.V., Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Derivados S.A. de C.V. – all members of the Scotiabank group and authorized users of the Scotiabank mark. The Bank of Nova Scotia is incorporated in Canada with limited liability and is authorised and regulated by the Office of the Superintendent of Financial Institutions Canada. The Bank of Nova Scotia is authorized by the UK Prudential Regulation Authority and is subject to regulation by the UK Financial Conduct Authority and limited regulation by the UK Prudential Regulation Authority. Details about the extent of The Bank of Nova Scotia's regulation by the UK Prudential Regulation Authority are available from us on request. Scotiabank Europe plc is authorized by the UK Prudential Regulation Authority and regulated by the UK Financial Conduct Authority and the UK Prudential Regulation Authority.
Scotiabank Inverlat, S.A., Scotia Inverlat Casa de Bolsa, S.A. de C.V, Grupo Financiero Scotiabank Inverlat, and Scotia Inverlat Derivados, S.A. de C.V., are each authorized and regulated by the Mexican financial authorities.
Not all products and services are offered in all jurisdictions. Services described are available in jurisdictions where permitted by law.