New vehicle sales declined 16.9 percent in October from a year ago, the National Association of Automobile Manufacturers of South Africa (Naamsa) said on Tuesday.

This put the rate of decline in the sale of new vehicles at its lowest level since April 2008.

"This reflects the gradual consolidation in consumer confidence on the back of lower interest rates and easier lending criteria," Nedbank Group's economic unit said.

Over the month, sales of passenger vehicles increased for the second month, helping the annual rate of decline to moderate sharply to 9.7 percent.

Sales of commercial vehicles, however, remain depressed by weaker fixed investment activity, Nedbank said.

All three major categories dropped

"The 15 percent jump in sales of medium commercial vehicles over the month was offset by 6.7 percent and 8.5 percent drops in light and heavy commercial vehicle sales.

"This dragged total sales of commercial vehicles down by 5.8 percent month-on-month."

On an annual basis, all three major categories of commercial vehicle sales recorded dropped, but the pace of decline in medium and heavy commercials moderated, while that of light commercial vehicles accelerated.

The gradual recovery in South Africa's export markets helped vehicle exports to increase sharply over the month (up by 50 percent) to 20 948 units.

"This helped the annual rate of decline in total export sales to moderate to 25.4 percent in October compared with the same month last year from a 49.3 percent drop recorded in September," Nedbank said.

Exports increased by 64.7%

Exports of passenger vehicles increased by 64.7 percent month-on-month in October while exports of commercial vehicles increased by 16.1 percent.

Nedbank said vehicle sales were expected to improve further in the coming months, mainly supported by the recovery in sales of passenger vehicles due to low interest rates and easier lending criteria.

"However, this will partly be offset by the effect of job losses and the high level of household debt," it said.

According to Nedbank, sales of commercial vehicles would recover at a very slow pace as fixed investment activity remained weak.

Conditions remained very weak

"Exports will benefit from improvement in economic activity in our trading partners, although this will be partially contained by the stronger rand," it said.

There was also a danger of demand from this source faltering once the impact of targeted fiscal stimulus measures dissipated.

Turning to the data's implications, Nedbank said despite the improvement in passenger vehicle sales off a very low base, underlying conditions remained very weak.

"Other recently released economic indicators, such as weak retail sales, falling credit demand as well as the increase in job losses also indicate a weaker economy."

Nedbank said as inflation had continued to ease, the SA Reserve Bank could cut the repo rate for the last time in the cycle.

Sapa

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