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The surge in Australia's vehicle sales in October showed clear signs of a recovery in both consumer and business demand, Matthew Hassan, senior economist at Westpac Economics, said on Thursday.
Figures from the Federal Chamber of Automotive Industries showed on Thursday that total sales rose 3.4% month-on-month in October, which Westpac estimates to equate to a 5% rise in seasonally adjusted terms. The economist said the temporary tax breaks for business buyers, which had caused a spike in commercial sales in June and a subsequent drop-off through July-August, are likely to have had little or no effect on monthly sales in October.
Hassan said the vehicle sales data of October are the first clear, unambiguous sign of an underlying recovery in sales, and seemed to show a quickening in consumer spending on vehicles. The data also seemed consistent with the Westpac-Melbourne Consumer Sentiment survey's question on 'time to buy vehicle' and the recent retail sales data, which pointed to the freeing-up in discretionary spending typically seen in the initial stages of a cyclical recovery in consumption, the economist added.
"Indeed, if passenger vehicle and SUV sales sustain at current levels, through the year sales growth will rise to double digit rates by Q1 next year", Matthew Hassan said. Westpac estimates that passenger vehicle sales were up about 1.6% for the second month running, SUV sales up 6% and 'other' vehicle sales up by about the same, led by strong light commercials.
"Notably the vehicle sales data also shows business spending on vehicles is starting to quicken suggesting Q4 could see a significant pick-up in domestic demand more generally", the economist said.
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