Global auto sales: Slightly firmer trend continued in October, supporting our view that a renewed global industrial recession can be averted
 
According to our aggregation, in seasonally adjusted terms, global auto registrations edged slightly higher in October, following more significant gains the prior two months. For 2011, we estimate that global auto registrations will be about 57.6mn.*
 
The picture that arises from the pace of October global auto sales is broadly in line with what we have been saying over the past few months (see Global manufacturing confidence stabilised in October, 1 November 2011). That is, at an aggregate global level, we see increasing signs that an industrial recession has averted. However, these are only tentative, as data coming from the euro area are consistent with an intensifying industrial recession at the regional level.
 

In detail
 
Global auto registrations rose only 0.8% m/m (3.2% y/y) in October, after gains of 3.9% m/m (5.1% y/y) in September and 3.2% m/m in August.
 
The regional breakdown suggests that while in most parts of the world car sales are still on a relatively stable upward track since the Japanese earthquake, in the euro area the trend is flat, signaling that risks persist of an industrial 'double dip' (a message more strongly reinforced by the PMI data).
 
In the US, October vehicle sales continued the strong upward trend started in September, rising 6.2% above the Q3 average of 12.4mn units (1.2% m/m growth), following a 2.7% increase in Q3 from Q2. This was in line with our team's expectation and consistent with an overall modest growth in real consumer spending.
 
In Japan, new auto sales rose 27.6% y/y in October, the first positive printing in 14 months (after falling 2.1% y/y in September). On a seasonally adjusted basis, auto sales increased 3.8% m/m following a 5.7% m/m decline in September. October auto sales rose 6.7% above the Q3 average, following a very strong increase of 28% in Q3 versus Q2.
 
In China, a 1.3% m/m increase in vehicle sales was in line with a steady moderation in growth. After a 10.7% q/q increase in Q3, auto sales rose 5.9% in October above the Q3 average.
 
The main concern remains the euro area, where auto registrations fell by 0.65% m/m in October to an annualised level of 10.4mn units. Compared with Q3, auto registrations were nearly flat in October (adding 0.1%), after an increase of 2.5% q/q in Q3. Inside the euro area, the numbers improved in Germany and France but fell more strongly in Spain and Italy, pushing the aggregate level down altogether.
 
Auto sales declined in Brazil as well, mostly on account of weaker demand where inventories are apparently still high. The October level decreased 1% below Q3 average, after a 0.4% decrease in Q3.
 
All in all, auto sales data for October appear consistent with stabilisation of the manufacturing sector. It seems more likely that the recent flattening of the global auto sales series indicates an industrial stagnation, rather that a recession. That said, we bear in mind the worrisome developments in the euro area and the already evident effect of the weakness in demand there on other part of the world (notably Asia) through the exports channel.

* The global auto sales series includes the US, Japan, euro area, Mexico, Brazil, Russia, China, India, South Korea, Taiwan, South Africa and Poland. The regional series include domestic passenger cars sales. In the US and France, the series also includes light trucks, and in China and Latin America, it also includes commercial vehicles.
 

source: BarCap