The Western European car market slowed considerably during October. The selling rate, which we estimate at a seasonally adjusted annualised 14.7 mn units/year during the month, was lower than in any month this year, with the exception of June. The downward trend that was hinted at in earlier months seems to be confirmed by this figure. Taking a moving average to smooth out trends, the underlying selling rate has declined from 15.2 mn units/year in February to its current level of 14.9 mn. We indicated in our last report that the final sales number for 2000 could be bracketed within a narrow range on either side of 15.0 mn units, compared to last year’s 15.2 mn. The October data confirm this, but also suggest which side it will be: more likely below 15.0 mn. Many major markets other than Germany have now peaked – though coming tax cuts could boost some in the future. The loss of demand from these countries is larger than can be offset by the German trend. In Germany, the selling rate had dropped to a low point in mid-summer. It has since improved very slightly, but not by enough to prevent total West European demand from continuing to decline.

The chart below shows total West European sales. The squares represent the total number of cars sold in a year, while the hollow dots represent the selling rate in individual months, and the continuous line represents a moving average of these. We indicate the latest two months. All figures for September are now in. For October, all major markets and some minor ones have reported. Our experience is that the final figure will change little from the initial estimate shown.

Our provisional estimate that German sales during September had been running at an annualised rate of 3.7 mn units/year proved to be on the high side. Final figures issued by the Kraftfahrt Bundesamt on October 23rd gave a figure of 270,393 units for the month, which corresponds to an annualised 3.6 mn units/year. Provisional figures for sales during October indicate a very similar, or marginally higher, absolute number. However, because October is normally a busier selling month than September, this corresponds to a much lower selling rate of 3.3 mn units/year. This is a disappointing return to the weakness that we had been seeing during the second quarter. Nevertheless, the trend in orders for new domestically produced vehicles continues to be upwards, and the backlog of unfilled orders has been rising, though very gradually, for the last year.

Everybody expects January to bring a bumper crop of sales in France, following changes that bring the new model year into line with the new calendar year. The question that is posed by a rather weak October number of 184,765 new cars registered is whether it has been depressed by the postponement of purchases into the new year, or whether it gives a true picture of the underlying state of demand. We believe the latter. On our estimates of the new seasonal pattern, the selling rate in France has been steady at just over 2.0 mn units/year for the last three months, a significant fall from the average 2.2 mn unit rate that was seen during the first 7 months of 2000. Not coincidentally, the last month has brought news of a significant decline in consumer confidence in France. Incoming order figures point to the market having peaked, though the number of new orders in October was an improvement on the recent past (and could reflect orders placed for delivery in the new model-year).

The 153,541 new cars bought from dealers in the UK during October represent a relatively surprise-free number. Adding in an allowance for cars purchased in other ways (such as through non-UK dealers), we estimate the selling rate for the month at 2.1 mn units/year. The selling rate has been gradually declining as the year has progressed, influenced by a less dynamic wealth effect from the property market, higher interest rates, and some decline in confidence. Of the two bumper months this year, March and September, when the registration letter changes, the former showed a gain on the year-earlier figure, the latter a decline. There may be some margin of error in calculating seasonal adjustments after relatively short experience of the new system, but that should provide a clear enough signal that the market has peaked.

The Italian estimate of 194,200 new cars registered in October was a significant decline (after seasonal adjustment) from the selling rate in the previous month. ANFIA’s press release indicates that new registrations were held back to a significant extent by disruptions cause by floods in the North of the country. At the same time, the continuation of efforts to work off a stock of non-Euro-III-compliant vehicles may have worked in the opposite direction. This is suggested by the 16.5% year-on-year rise in Fiat‘s sales (a much larger figure than the 5.6% rise in total sales), since Fiat has been the manufacturer most affected by this problem. Whatever the distortions, the level of demand has remained very strong, with the average selling rate at 2.47 mn units/year so far in 2000, and the October figure not far short of this. However, the ANFIA/UNRAE data on new orders indicate that these are now weakening, following a rise in the earlier part of the year.

Although the smaller countries have made a disproportionate contribution to growth during the earlier months of the year, those that have already reported October figures confirm the weakening trend that was apparent in the larger countries.