European car market revs up in summer

New registrations jump by 5.6% in August

In this photograph taken on Sept 1, an operator monitors the automatic optical inspection of gel dispensing, in a clean room of the Valeo factory in Sable-Sur-Sarthe, north-western France. Compromised between electric and thermal

PARIS, Sept 14, (AFP): The European car market booked its best-ever August in 10 years this year, with new registrations jumping by 5.6 percent last month, the European Automobile Manufacturers’ Association ACEA said on Thursday.

A total of 865,000 new cars were registered on Europe’s roads in August, ACEA calculated in figures released as the

The Brexit vote has put the BoE in a dilemma as it sought to balance the need to support the economy through the shock of leaving the European Union in March 2019 while also keeping a grip on fast-rising inflation.

It said that, if the trend towards shrinking spare capacity and rising underlying inflation continued, “some withdrawal of monetary stimulus was likely to be appropriate over the coming months.” Sterling leapt by a cent against the dollar after the statement and 10-year gilt yields increased by 4 basis points to 1.18 percent, their highest level since the BoE’s last meeting on Aug 3.

“I would describe (a rate hike in) November as being live,” Nomura economist George Buckley said.

But weaker than expected inflation or disappointing growth in jobs or wages could still throw the BoE off course, he added.

The BoE and its Governor Mark Carney have previously signalled the probability of rate hikes ahead, only to be caught out by unexpected changes in the economy.

On Thursday it said the economy was doing a little better than it had expected last month, and that inflation was likely to rise further above its 2 percent target to exceed 3 percent in October — slightly more than previous forecasts — after reaching 2.9 percent last month.

But it said it was “unclear how sustained any increase in GDP growth might be over the medium term”, citing unknowns about how households and businesses would react to the Brexit process.

The BoE repeated a previous message that all nine MPC members thought rates could rise faster than financial markets expected but any increases would be gradual and limited.

Economists polled by Reuters had mostly expected a 7-2 vote in favour of keeping the extra stimulus brought in in August 2016 when the economy appeared to be reeling from the shock of the Brexit vote.

But a minority had seen a chance that BoE chief economist Andy Haldane would join Ian McCafferty and Michael Saunders in backing an immediate increase in rates to 0.5 percent.

cars, the light 48-volt hybrid is attracting more and more manufacturers. In the context of ‘dieselgate’ and hardened approvals, the Valeo plant in Sable-Sur-Sarthe produces this technology for the future. (AFP)

industry’s biggest showcase in Europe, the IAA car show, opens its doors to the general public in Frankfurt.

The region’s major markets of Italy and Spain booked the strongest increases — of 15.8 percent and 13 percent respectively. France and Germany came next, clocking up growth in new registrations of 8.4 percent and 3.5 percent.

But demand for cars in Britain, which is negotiating to leave the bloc, skidded 6.4 percent lower, ACEA said.

Taking the first eight months as a whole, “demand for passenger cars maintained momentum throughout Europe,” the organisation continued.

“With more than 10 million new vehicles registered across the EU, registrations went up by 4.5 percent compared to the same period last year.”

Again, while Italy, Spain, France and Germany all saw demand increase across the January-August period, Britain “registered a slight decline” of 2.4 percent.

As German Chancellor Angela Merkel was scheduled to open the IAA, ACEA calculated that German auto giant VW remains Europe’s biggest carmaker, commanding 23.6 percent of the market over the January-August period.

But it nevertheless saw its market share eroded slightly as it continues to battle the so-called “Dieselgate” scandal in which it admitted to installing emissions-cheating software into 11 million diesel engines worldwide.

French carmaker PSA Peugeot Citroen, the region’s number two, saw its market share increase by 0.4 percentage point to 10.6 percent as it integrated Opel and Vauxhall, the German and British makers it recently acquired from General Motors, ACEA said.

Support

Haldane — previously viewed as a dove — said in June that he expected to support a rate rise later in 2017.

After performing better than the BoE expected in 2016, Britain’s economy slowed in the first half of 2017 as the highest inflation in four years squeezes consumer demand.

The central bank is concerned that Britain’s ability to grow strongly over the medium term without generating excessive inflation has weakened.

It says the immediate surge in inflation above its target is due to the fall in the pound after the Brexit vote.

Sterling fell to a nine-month low on a trade-weighted basis on Aug 29, though it has since recouped these losses and is little changed from its level at the time of the BoE’s last rate decision on Aug 3.

This strengthening partly reflects growing market expectations of a rate rise. Short sterling interest rate futures price in a 44 percent chance of a move by the end of this year.

The pattern over recent years has been for such expectations to fade rapidly, however, and most economists polled by Reuters at the end of August did not expect a rate rise until 2019.

The BoE said that wage growth of 2.1 percent in the three months to July was stronger than it had expected, although it was still unclear if there would be the sustained pick-up it is forecasting. Unemployment at a 40-year low of 4.3 percent is also a more positive development than the BoE had expected.

There is no news conference following this month’s policy decision. Carney is due to speak at the International Monetary Fund in Washington on Monday.