Ontario Key Driver in Record Vehicle Sales, says Bank Economist

Ontario behind the record new vehicle sales, says economist Carlos Gomes.
Gomes, Scotiabank’s auto industry specialist, say that while all regions in Canada have posted double-digit sales gains through the first quarter, Ontario has almost single-handedly driven Canadian vehicle sales to record levels in early 2002.
Elsewhere in Canada, Alberta is the only province where vehicle sales will climb to a new high for the third consecutive year. The results are included in the latest Canadian Auto Report released today by Scotia Economics.
“Purchases in Ontario have soared to an annualized 726,000 units during the first three months of the year – accounting for more than 85% of the sales gain across Canada since the middle of 2001,” says Gomes. The improvement reflects ongoing interest-free loans provided by automakers and a rebound in Ontario’s manufacturing sector – including a double-digit increase in vehicle production since late last year.
“Despite spectacular first-quarter vehicle sales, we believe that purchases in Ontario will moderate in coming months alongside some easing in incentives,” adds Gomes. “Full-year volumes are likely to hover around 645,000 units, in line with the record high of two years ago.”
New car and light truck sales in Quebec have also posted robust gains in early 2002, averaging an annualized 435,000 units. Record Quebec sales have been driven by solid employment growth and record consumer confidence. In Alberta, vehicle purchases are expected to approach 190,000 units this year, up from 183,000 last year.
“Record volumes in Alberta reflect a snap-back in the energy sector, with crude oil and natural gas prices picking up in recent months,” comments Gomes. The province is benefiting from an increasingly diverse economy. Investment interest remains high in oil sands and heavy oil, and the petrochemical industry is emerging from the downturn of recent years. Also, Alberta’s employment has climbed by 2% over the past 12 months – a level normally required to sustain rising vehicle sales.”
In Manitoba and Saskatchewan, vehicle sales continue to be held back by weak grain farm income. “We expect passenger vehicle purchases in Manitoba and Saskatchewan to total 79,000 units in 2002, roughly unchanged from last year, and well below the recent peak of 87,000 units in 1997,” adds Gomes.
In British Columbia, sales have also posted solid gains in early 2002, but unemployment continues to weaken alongside layoffs in the province’s key lumber sector.
Vehicle purchases in Atlantic Canada have surged in 2002 to an annualized 122,000 units – a level matching the 1988 peak. However, the pace of job creation remains sluggish, suggesting some retrenchment is likely.
Turning to overall market conditions, U.S. vehicle sales climbed to an annualized 17.7 million units last month, up from an average of 16.2 million in the first quarter. April’s solid performance was the first year-over-year increase in 2002 and reflects strong inflation-adjusted income gains alongside a rebounding economy, as well as the best vehicle affordability in more than twenty years.
Canadian purchases also rebounded sharply in April, surging 12% above a year earlier to an annualized 1.72 million units. Sales in Canada have averaged 1.70 million units so far this year, up from a record 1.57 million in 2001. Purchases continue to be bolstered by strong job creation, generous incentives and solid replacement demand.