super september sees new car sales soar

Economics news – Super September sees new car sales soar

New Car Sales
September new car registrations produced the highest monthly figure since March 2008 as  sales totaled just over 400,000 units. Compared to last September sales were up by 12%. The UK car market is on track to sell 2.25 million units in the year up by 10% on 2012.

Mike Hawes, Chief Executive of the SMMT said “Robust private demand has played a major role in this growth with customers attracted by exciting, increasingly fuel-efficient new models”. Private registrations have risen by 17% in the year, a measure of the strength of consumer demand.

Markit/CIPS UK PMI® data
The Markit/CIPS UK PMI® data series were released this week providing more good news on the strength of the economy.
Manufacturing
The UK manufacturing sector continued to expand at a marked pace in the month to round off its strongest quarterly performance since the opening quarter of 2011. At 56.7 in September, the seasonally adjusted Markit/CIPS Purchasing Manager’s Index® (PMI®) remained in expansion territory for the sixth successive month and was little-changed from August’s two-and-a-half year peak of 57.1.

Service Sector
The UK service sector continued to perform strongly in September to round off the best quarterly performance of the sector since Q2 1997. Activity and new business both rose at rates close to the August high. The Business Activity Index, recorded a level of 60.3, fractionally down on August’s near seven-year high of 60.5.

Construction
In the construction sector, the headline Markit/CIPS UK Construction Purchasing Managers’ Index® (PMI®) posted 58.9 in September, down only fractionally from a near six-year high of 59.1in August. The index was above the neutral 50.0 value for the fifth month running and signaled a sharp expansion of overall construction output. Housing construction activity increased at the fastest pace for almost a decade.

So what does this all mean?
The economy is recovering and growing at a much faster rate into the second half of the year. The service sector has maintained steady progress since 2009 growing at 1.6%. The manufacturing sector is recovering but the construction sector, particularly housing, is providing the significant boost to output. We think new housing, starts and completions, could grow by 30% this year boosting overall construction output by over 4% in the second half.

This is the primary reason we have increased forecasts for 2013 to 1.5%. GDP growth is on track for 2.5% next year. Growth, inflation, jobs and even the borrowing figures are heading in the right direction. The trade figures alone will continue to disappoint. The UK cannot grow faster than major trade partners without exacerbating the external deficit.

What happened to sterling?
Sterling moved down against the dollar and against the Euro. The pound closed at £1.6012 from $1.6150. Against the Euro, Sterling closed at €1.1816 from €1.1935. The dollar moved down against the yen closing at ¥97.4 from ¥98.2.The dollar euro cross rate at 1.3556 was largely unchanged from 1.3530

Oil Price Brent Crude closed at $109.46 from $108.63. The average price in October last year was almost $112. We expect oil to average $112 in the current quarter, with no real inflationary impact.

Markets, slipped - The Dow closed at 15,073 from 15,258. The FTSE closed at 6,454 from 6,512. The impasse on the US budget and government shut down appears to have damaged UK investment sentiment more than the US.

UK Ten year gilt yields closed at 2.75 from 2.73, US Treasury yields closed at 2.64 from 2.63.

Gold closed at $1,310 from $1,3361. The bulls have it or do they? Gold will trade sideways for some time yet.

That’s all for this week, don’t miss The Sunday Times and Croissants out tomorrow.

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