According to Scotiabank’s latest Global Auto Report, new vehicle sales in Canada saw their sharpest decline for nearly two years in August.
Data points to a 3.6 percent year-over-year decline in July followed by a 1.6 year-over-year decline in August. Looking at the larger picture, this marked the sixth consecutive month of year -over-year declines in car and light truck sales. Yet despite the overall decline in new vehicle sales, fleet purchases were up, posting double digit gains, helping cushion the impact of falling retail sales.
Yet while auto sales are down, the Canadian economy overall appears to be enjoying a resurgence. Data reports economic expansion at an annualised rate of 2.9 percent quarter over quarter. The uptick follows a weak start to the year.
Along with economic growth, wages have also seen reported increases tying in with the lowest unemployment rate for a decade.
The ratio of new vehicle sales to prime-age population is also still near record highs witnessed over the last few years, yet rising interest rates are expected to eat into disposable income—restraining big-ticket purchases by Canadian households.
Looking at the new vehicle market in different parts of the country by province for July (August data was not available at the time of writing), Ontario—which accounts for over 40 percent of vehicle purchases in Canada—saw a slight year-over-year increase in sales during July, while vehicle purchases in Alberta and B.C.—over a fifth of the Canadian auto market combined—fell by over 10 percent year over year.
Sagging demand in BC is seen as the biggest decline since 2009 and marks a pointed reversal from 2017 when auto deliveries expanded by 7.1 percent. The contraction is expected to continue as borrowing costs increase and housing affordability in the province remains a problem. In Alberta, a similar situation saw demand tail off after witnessing growth of 11.4 percent last year.
Alberta’s sales growth in 2017 was largely fuelled by strong economic recovery as well as high rates of vehicle replacement as a result of the Fort McMurray wildfires.