Weakest November new car sales in 13 years

New vehicle sales; Construction & services activity gauges

According to the Federal Chamber of Automotive Industries, new vehicle sales totalled 80,639 units in November – the lowest number of sales for the month of November since 2008. Sales are down 15.3 per cent on a year ago.

The AiGroup & HIA Performance of Construction index (PCI) eased from 57.6 to 57 in November. Average capacity utilisation hit a record high of 85.7 per cent with commercial building activity at a record high 68.8.

The final Australian IHS Markit Services Purchasing Managers’ index (PMI) rose from 51.8 to 55.7 in November.

PCI and PMI results above 50 points indicate an expansion in activity, with higher results indicating a stronger pace of expansion.

What does it all mean?

• Aussie new car sales dipped in November with the Federal Chamber of Automotive Industries today reporting that, “the drop in sales reflecting well recognised international supply issues.” November new vehicle registrations dipped to 80,639 units – the lowest number of sales for the month of November since 2008. That said, Aussie car dealerships are still on track to sell at least one million new vehicles in calendar year 2021, with November year-to-date cumulative sales reaching 971,429 with one month remaining.

• Car makers and dealerships continue to be adversely impacted by the global semi-conductor shortage during the pandemic. The chip supply shortage has been exacerbated by strong consumer demand for smartphones and computers during Covid-19 lockdowns, with automakers competing with tech giants Apple and Samsung for semi-conductors. And the automotive industry is reliant on multiple microchips for things like infotainment as well as less-advanced ones for components like power windows, which has further slowed global car production.

• Aussie construction activity remains buoyant. The main leading indicator of construction activity – the Australian Industry Group (AiGroup) and Housing Industry Association (HIA) Australian Performance of Construction Index (PCI) – has bounced-back to pre-Delta lockdown levels after sharp contractions in both July and August. In fact, the disruption to construction work from lockdowns in Australia’s south-east has been short-lived with on-site building activity resuming quickly once government restrictions eased, supported by in acceleration in Covid-19 vaccination rates.

• Pandemic supply chain bottlenecks and labour shortages remain acute with Australia’s construction industry hit by high prices and a capacity squeeze. Average capacity utilisation hit a record high of 85.7 per cent in November, suggesting that further growth and employment and investment is needed in early 2022.

• Strong demand for housing construction, increased renovations activity and building material shortages have pushed up input prices to record highs in recent months. And builders are passing these higher costs on to their customers with selling prices just below record highs.

• We expect construction activity to ramp up over the coming quarters as Delta lockdown restrictions ease. Home building is expected to remain elevated over the next 18 months due to still-solid home buyer demand, record-low interest rates and a large backlog of approvals due to recent lockdowns.

• Aussie builders and their contractors, therefore, are expected to remain under pressure to deliver projects on-time and on-budget as they work through a huge pipeline of residential, commercial and infrastructure-related construction work. And while housing and engineering building activity both eased in November, commercial building activity hit a record high of 68.8 points, according to the AiGroup and HIA PCI gauge.

• Activity in Australia’s growth engine – the services sector – expanded at a faster pace in November. An easing in government virus restrictions has boosted private sector business confidence. But surveyed business owners in the services sector reported that price pressures were intensifying, with input price inflation hitting record highs amid labour and raw material shortages, supply chain disruptions and port blockages. Of course, rising costs of inputs and production could eventually lead businesses to pass-on these higher costs to consumers through price hikes.

What do you need to know?

New vehicle sales – November

• New vehicle sales totalled 80,639 units in November – the lowest number of sales for the month of November since 2008. And sales are down 15.3 per cent on a year ago.

• Passenger car sales fell 18.7 per cent in November compared to a year earlier; sales of sports utility vehicles (SUVs) dropped by 20.6 per cent; light commercial vehicles were down 4.8 per cent; while heavy commercial vehicles were up 19.4 per cent on November 2020.

• According to the Federal Chamber of Automotive Industries, “Toyota was the market leader in November recording 15,239 sales. This was followed by Hyundai with 6,854 sales. Third place went to Ford with 6,215 sales. Mitsubishi sold 5,720 vehicles and Mazda came in fifth with 5,295 vehicles sold.”

• And, “Sales in Western Australia were down by 19.8 per cent with 7,081 vehicles sold. Queensland saw 16,001 vehicles sold which is a decline of 19.5 per cent. Victorian sales decreased by 19.4 per cent with 21,445 new cars leaving showrooms. Sales in Tasmania were down by 12.8 per cent with 1,450 vehicles sold. South Australia saw 5,052 vehicles sold which represents a decrease of 10.6 per cent. The Northern Territory was down 8.5 per cent with 714 vehicles sold. Finally, the ACT recorded 1,406 new cars sold which was down 3.1 per cent on last year’s figures.”

• In the 12 months to November, new vehicle sales eased to a 4-month low of 1,067,081, but are still up 17.8 per cent on a year ago.

Performance of Construction Index (PCI) – November

• The Australian Industry Group (AiGroup) and Housing Industry Association (HIA) Australian Performance of Construction Index (PCI) eased from 57.6 to 57 in November. An index above 50 indicates an expansion in activity.

• The AiGroup reported, “The Australian PCI remained elevated in November but decelerated mildly, indicating the pace of improvement recorded in October was broadly maintained, following the end of lockdowns and a return to more normal conditions.”

Purchasing Managers’ indexes (PMIs) – November

• The final Australian IHS Markit Services Purchasing Managers’ index (PMI) rose from 51.8 in October to 55.7 in November. And the final composite PMI (which includes manufacturing activity) rose from 52.1 in October to 55.7 in November. Both readings were at 5-month highs, with indexes above 50 indicating an expansion in activity.

• IHS Markit economists said, “Growth momentum in the Australia service sector improved in November, according to the IHS Markit Australia Services PMI, with the easing Covid-19 restrictions continuing to drive the economic recovery. Demand and business activity both expanded at faster rates. Export demand contracted further, but the expected easing of border restrictions may revive this going forward.”

• And, “Price pressures meanwhile continued to build with input price inflation charging to a new survey record. Labour constraints were also reported, though these are consistent with reopening trends and will be further observed in the coming months.”

Published by Ryan Felsman, Senior Economist, CommSec