No surprise that new car sales are falling

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Northern Ireland retailers have benefited from the tourism boom and a surge in cross-border shoppers.  With the latter boosted by the post-EU referendum depreciation in sterling. This provides a veneer of consumer strength driven by visitors. However, the underlying picture is somewhat weaker.

New car sales are a key barometer of consumer confidence and provide a more meaningful indicator of the health of the consumer. Inflation has been outpacing wage growth and this is sapping household disposable incomes. A significant range of welfare benefits are also in the midst of a multi-year freeze. Against this background it is perhaps not surprising that the biggest discretionary spending item after housing, new car sales, are falling.

Showrooms reported their worst October for sales of new cars in five years, with registrations for the first 10months of the year down over 5% y/y.

2017 looks set to see the biggest annual decline since 2011. Local new car sales are over 20% below their peak in 2007.

This compares with the UK where new car sales, though falling, are still 8% above their pre-recession high. 2018 is also expected to be a challenging year for the local consumer with the cost of living squeeze set to tighten its grip.

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A former Bank of England Governor once said of central banking that “boring is best”. Last week though, central bankers were once again hogging the limelight. First off, the US Federal Reserve, which having raised rates must now work out whether the economy can support them. Second the Bank of Japan, which joined the negative rate club. And with all eyes on the Bank of England this week, “boring” seems a distant memory.

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