UK car sales increase in October despite decline in consumer demand

Car sales in the UK rose marginally in October, data released on Friday (4 November) showed, as a decline in the demand from individual consumers was offset by businesses purchasing fleet cars.

The Society of Motor Manufacturers and Traders (SMMT) said car sales in October climbed 1.4% year-on-year to 180,168 vehicles, although it added that a number of cars registered to businesses in the three months since the Brexit vote were effectively bought before the 23 June referendum.

As such, the trade body added, it is difficult to analyse the pattern the long-term impact Britain's decision to leave the European Union has had on the sector.

Meanwhile, demand from individuals fell for the seventh consecutive month, dropping 1.1% year-on-year in October.

"Recent increases in list prices by manufacturers in response to sterling's depreciation, averaging about 2%, likely have contributed to depressing sales too," said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

"Manufacturers have warned that these increases are just the first step in their response to the lower pound."

The SMMT expect registrations to hit 2.68 million this year, surpassing last year's record-high of 2.63 million. However, the industry body was more pessimistic about the future, forecasting registrations will decline by approximately 5% next year.

"It looks inevitable that consumers' purchasing power will progressively weaken over the coming months [...] which will dilute consumers' ability and likely willingness to splash out on big ticket items like cars," said Howard Archer, chief UK and European economist at IHS.