Signs of recovery in the UK’s new car sales

 Over 400,000 new cars were registered in the UK last month, the highest number for five and a half years. And while this increase of 12% over sales in September 2012 still cannot compare with Mercedes 21% rise in sales in China, it must surely be a sign of recovery in the UK economy.

As reports from the BBC and Reuters indicate, there are a number of reasons contributing to the rise in demand in the UK - these are also discussed by Mike Hawes of the Society of Motor Manufacturers and Traders in a radio interview included in the BBC report:

• there is an increase in consumer confidence, alongside pent-up demand from those who have delayed replacing their old model in the last 5 years
• retailers are offering attractive financing deals which include the cost of servicing and road tax, thus making financial planning easier for consumers
• the high cost of fuel is creating demand for new models with more fuel-efficient engines
• it is three years since the end of the car scrappage scheme which gave consumers incentives to buy new cars - many of those buyers may choose to replace their cars when they reach three years old
• PPI payments are giving people a lump sum of cash which they may choose to spend rather than to save, in the climate of low interest rates
• the new '63' registration came into use in September; new registrations are typically accompanied by a rise in sales, and is it too far-fetched to suggest that this may be more popular than the previous '13' registration for some superstitious drivers?

Will this help to boost GDP growth in the third quarter of 2013? It surely must, although GNP and the circular flow of income might be a different story. A look at the list of best-selling models shows that only one in seven of the cars was made in the UK.