New-vehicle sales are expected to continue declining in 2019, particularly due to weakening fleet sales, Scotiabank Economics warned in a report Monday.
The bank said that while the year started with a “sharp rebound from weak sales in late 2018,” it was due to fleet sales being “the main driver of the rise in deliveries” so far in 2019.
Scotiabank said its fleet data is proprietary and doesn’t disclose the actual volume of fleet sales.
Ontario and Alberta were two provinces in which fleet deliveries helped improved the country’s overall number of total new-vehicle deliveries in March, it said.
Automakers are set to report April sales on Wednesday.
Ontario auto sales improved upon February’s 6.6 per cent year-over-year decline with a slight drop of 0.5 per cent year-over-year in March “on the back of a strong double-digit increase in fleet.”
Vehicle sales in Alberta posted their tenth consecutive year-over-year decrease in March, a 0.2 per cent dip, while improving from February’s 5.2 per cent year-over-year contraction “thanks to improving fleet deliveries” in that province.
“However, given abnormally-high fleet purchases in February and March, we anticipate that sales to businesses will soften in the coming months,” Scotiabank Economics said.
BETTER START, BUT …
The surge in fleet sales meant the start to 2019 has been better than the end of 2018.
“Compared to the fourth quarter of 2018, [total] sales in the first three months of this year have risen by 2.8 per cent,” the report reads. “We forecast that vehicle sales in Canada will slowly edge downward for the remainder of the year for a total of 1.93 million units delivered in 2019.”
Automakers sold 184,251 units last month, according to the Automotive News Data Center in Detroit. It marked the 13th consecutive month of sales declines in Canada.
SIGNS OF STABILITY
While sales to households continued to fall in March from a year ago, they are showing some signs of stabilizing, Scotiabank Economics said.
Household purchases in March recorded their smallest year-over-year decline since October 2018 and rose quarter-over-quarter following three consecutive quarterly declines, the report said.
“Households likely held back on big ticket purchases in the final quarter of 2018 owing to losses in equity markets and an overall souring of economic sentiment, though strong employment gains in January and February and a marked recovery in financial markets appear to have put a soft floor on the decline in retail auto sales,” the financial agency said. “Nevertheless, we anticipate that household spending will slow in 2019 in line with a temporary soft-patch in economic growth in Canada owing to government-mandated oil production cuts in Alberta, in addition to an anticipated slowing of GDP growth domestically as the economy aligns itself to its long-run potential.”