The ‘Ups’ and ‘Downs’ of European Car Registrations

European car registrations showed a solid 3.5% month-to-month gain in October; the 3-month moving average rose 3% as well, indicating that there is trend rather than volatility to the increase. Sales/registrations rose month-to-month in three of the five reporting countries. Registrations were up strongly by 9.7% in Spain, up 1.9% in Germany, and edging ahead by 0.2% month-to-month in Italy. Registrations did backdown by 0.2% in October in the United Kingdom and fell month-to-month by 1.5% in France.

Registrations had fallen in three of five reporting countries in September but had risen in all five of them in August. As always auto registrations data are hard to pin down and remain a volatile source of information on consumer spending.

Over three months the annual increase in auto registrations is higher in three of five reporting countries; the exceptions are Germany and the U.K. where in each case registrations fall by 5.6% at an annual rate. However, in Spain registrations rise at a 97.5% annual rate over three months; in Italy they rise at an 82.9% annual rate over 3 months; and in France they rise at a 6.5% annual rate. Over six months the annual rate of growth is positive in all five reporting countries and the same trend holds over 12 months. The pace of sales generally accelerates over six months compared to 12 months with France being the sole exception to that phenomenon.

Year-over-year registrations gain anywhere from 18.5% to 20.4% in Italy and Spain to as little as 5.6% in Germany. But there are increases all around. The growth in sales approach leads to a quite strong and relatively broad and durable assessment of registration trends based upon the growth statistics over 3 months, 6 months, and 12 months as well as the monthly data. And the results for the growth in sales are relatively durable.

Assessing the sales pace, instead of its growth- However, a broader look at the table begins to uncover some evidence of weakness, for example, looking at the selling pace in October 2023 compared to January 2020, there's a decline of 8.6% for total registrations. In fact, there are declines in four of the five reporting countries with only France showing an increase in the pace of sales as of October 2023 compared to the sales pace in January 2020 before Covid struck.

The chart at the top of this report gives a much clearer indication of what's going on. That chart is based upon unit sales rather than the growth in unit sales. The ranked performance of unit sales is presented in the table to the left. And this table we rank the level of unit sales on data back to 1995 and back to 2008 in the top portions of the table. The bottom two lines of the table rank overall performance and rank a smoothed 3-month growth rate of sales. Skipping to the bottom of the table, it's quite clear that the current growth rate of year-over-year sales is relatively strong for Europe overall ranked either from 1995 or ranking sales from 2008. The growth rates are somewhere between the 89th and 93rd percentile of all growth rates on those two periods, marking current growth rates as quite strong. This means over the past year growth has been recovering strongly. However, the data in the top of the table that rank the level of sales on two different periods across the countries show us that ranking from 1995 puts current unit sales at a 29-percentile level while ranking over data from 2008 puts them at a 46.5 percentile level. In other words, the totality of European sales either ranks in its lower one-third based on unit sales or just below its historic median over these two periods. Registrations on this view have not been strong at all.

Looking at the longer-dated rankings, Germany has a ranking in its 11th percentile. France has a ranking in its 22nd percentile. Spain stands at its 27th percentile, Italy is at its 31st percentile, and the U.K. has a 39th percentile standing. All these metrics are below the 50th percentile standing that marks the median for the period in each case.

Covid clearly killed the pizzazz for vehicle registrations in Europe. As the chart clearly shows, registrations are not back to the levels that had prevailed prior to the occurrence of Covid. In fact, sales are quite weak compared to what they had been in the pre-Covid period. On the other hand, there is currently a nice rebound going on with registrations recovering from their low in early-2022 and that appears to be continuing despite other data for Europe that have suggested that economic data are falling on harder times. Vehicle sales/registrations don't yet show any sign of succumbing to this kind of weakness. Instead, they continue to show signs that they're beginning to repair their long-term trend although they still are quite a good way below it.

The vehicle registrations data this month have a certain duality to them. They show how weak sales are compared to where they were before Covid struck based on the unit sales. And on the other hand, they show that the growth in sales continues to step up smartly. Overall, this is not a bad set of events. But given the prevarication in other economic statistics, we must wonder how much longer this kind of rebound can continue if other economic statistics continue to be as challenged as they have been in recent reports. Man does not live by car registrations alone...