Northern Ireland recruitment agencies may be capitalising on strong demand within a buoyant labour market, but , conversely, local car dealers continue to experience tough trading conditions with consumer demand for a new set of wheels remaining lacklustre. August saw some improvement, albeit marginal, with new car sales 1.5% higher than the same period last year. There were 3,701 new cars sold last month, some 54 higher than last August’s figure. However, the latter represented a five-year low so the latest improvement must be set within that context.
The longer term trend for new car sales in Northern Ireland remains a downward one. So far in 2018, January – August, there have been 38,407 new cars sold in Northern Ireland. This is some 3.0% below the corresponding period last year and over 8% lower than the same period in 2016. Furthermore, the volume of new car sales sold year-to-date represents the weakest in five years. The UK market is faring somewhat better but it is a similar story. UK new car sales between January – August 2018 were the weakest in four years. However, unlike the Northern Ireland market, UK car sales experienced record highs in 2017. Northern Ireland’s new car sales, on the other hand, are almost one-quarter below 2007’s record high.
New car sales are a barometer of consumer confidence as a car purchase is the largest discretionary purchase outside of buying a home. Other than a buoyant labour market, in terms of jobs growth rather than wage growth, the outlook for consumer spending and those sectors reliant on it remains challenging. Households’ disposable incomes are set to be squeezed further in 2019. Rates and private sector rents are outpacing inflation and wage growth. Meanwhile electricity and gas prices are set for double-digit increases of up to 18% in the coming weeks. Food price inflation is also set for a pick-up in inflation in the coming months linked to the unusually hot and dry summer. Motoring costs are also on the rise with petrol and diesel prices up 11% and 13% respectively over the last year. Petrol and diesel prices are currently at four-year highs and are a far cry from the £1 per litre that was almost achieved in early 2016.
With the cost of living squeeze set to intensify in the year ahead we can expect consumers to rein back on non-essential or discretionary expenditure (e.g. retail, leisure & entertainment). New car sales fall into this category. Against this backdrop we are likely to see new car buyers pay greater attention to fuel efficiency and lower cost cars. The so-called ‘cost of living crisis’ in recent years triggered a change in consumer behaviour. Demand shifted to smaller, more economical cars. Manufacturers responded with the supply of suitable vehicles. Just like our chocolate bars have got smaller, so too have our SUVs. This trend is set to continue.