Canadian auto dealers are as busy as ever, as consumers bought a record 182,000 vehicles in July – a sharp contrast to the slumping U.S. industry.
The monthly numbers tell a tale of an automotive business that is going in two different directions in the two countries. Vehicle sales have been surging in Canada throughout 2017, while for five straight months, U.S. auto makers have reported sales declines compared with last year.
General Motors Co. said that Canadian sales were up 22 per cent from the same time last year, moving 25,852 vehicles last month and closing the gap with the largest player in the market, Ford. Meanwhile, GM reported that sales were down 15 per cent in the United States from the previous year.
Other major auto manufacturers mirrored the contrast. Honda sales were up 10.7 per cent in Canada but down 1.2 per cent in the United States. Volkswagen sales rose a whopping 37.9 per cent in Canada, but were down 5.8 per cent in the United States.
Over all, Canadian auto sales were 4.9 per cent higher last month than in July, 2016, while sales were down 7 per cent in the United States.
“One of the more interesting things is not just the volume but the dollar sales. Canadians are spending a lot more on vehicles,” said Bank of Montreal economist Alex Koustas.
Mr. Koustas pointed out that amount Canadians spent in car sales was up 10 per cent in May and that luxury vehicle sales have gone up too. Canadian Maserati and Audi sales were up 86.7 per cent and 29.7 per cent, respectively.
While there isn’t one clear reason for why the Canadian and U.S. markets differ as much as they do, there are a number of economic factors at play.
Growth in the Canadian economy has picked up after a long sluggish period, while strong housing prices and low interest rates help support consumer borrowing.
“What I can see happening in Canada is that the consumer is more willing to take on the debt. There is a more positive outlook of the economy in Canada as well as people’s outlook of their personal situations,” said Haig Stoddard, an industry analyst at Wards Auto.
The jobs and wage trend has been similar in both countries. Employment went up by 45,000 in Canada in June and overall employment grew by 103,000 during the second quarter of 2017. In early July, the Bank of Canada raise interest rates for the first time in seven years. While the U.S. economy added 222,000 jobs in June, wage growth lagged.
Mr. Koustas pointed to housing numbers for a possible reason for consumer confidence among Canadians.
“You can’t discount housing prices. As they see the value of their homes increase and net worth increase, you’re going to have a lot more confidence there,” Mr. Koustas said.
Housing prices rose 9.6 per cent on average in 2016 and has an expected gain of 7.8 per cent in 2017, according to Royal Bank of Canada. However, the housing market has started to cool down. RBC projects a price increase of just 1.2 per cent in 2018.
Numbers aside, Mr. Stoddard also said consumer confidence in the United States could be affected by the unpredictable direction of policy from the White House.
“If there’s a lot of uncertainty from the current administration and that filters down to the economy and everyday consumer, that’s a red flag to watch for,” Mr. Stoddard said.
There were a few outliers. Ford sales were down just more than 7 per cent in both countries. Sales for FiatChrysler dropped on both sides of the border as well, with a 3-per-cent drop in Canada and a 10-per-cent drop in the United States. Toyota sales were up in both countries; 5.8 per cent in Canada and 3.6 per cent in the United States.
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