Best of the Week
Most Popular
1.Are UK Savings Interest Rates Finally Starting to Rise? Best Cash ISA 2017 - Nadeem_Walayat
2.Inflation Tsunami - Supermarkets, Retail Sector Crisis 2017, EU Suicide and Burning Stocks - Nadeem_Walayat
3.Big Moves in the World Stock Markets - Big Bases - Rambus_Chartology
4.The Next Financial Implosion Is Not Going To Be About The Banks! - Gordon_T_Long
5.Why EU BrExit Single Market Access Hard line is European Union Committing Suicide - Nadeem_Walayat
6.Trump Ramps Up US Military Debt Spending In Preparations for China War - Nadeem_Walayat
7.Watch What Happens When Silver Price Hits $26...  - MoneyMetals
8.Stock Market Fake Risk, Fake Return? Market Crash? - 2nd Mar 17 - Axel_Merk
9.Global Inflation Surges, Central Banks Losing Control and Triggered the Wage Price Spiral? - Nadeem_Walayat
10.Why Gold Will Boom In 2017 - James Burgess
Last 7 days
Foundation – Fall Of The American Galactic Empire - 27th Mar 17
Stock Market More Correction Ahead - 27th Mar 17
US Dollar Inflection Point - 27th Mar 17
Political Week Presurres US Stock Market - 25th Mar 17
London Terror Attack Red Herring, Real Issue is Age of Reason vs Religion - 25th Mar 17
Will Washington Risk WW3 to Block an Emerging EU-Russia Superstate - 25th Mar 17
Unaccountable Military Industrial Complex Is Destroying America and the Rest Of The World Too - 25th Mar 17
Silver Mining Stock Fundamentals - 24th Mar 17
A Walk Down the Dark Road of Bad Government - 24th Mar 17
Is Stock Market Flash Crash Postponed Until Monday? - 24th Mar 17
Stock Market Bubble and Gold - 24th Mar 17
Maps Of Past Empires That Can Tell Us About The Future - 24th Mar 17
SNP Independent Scotland's Destiny With Economic Catastrophe, the English Subsidy - IndyRef2 - 24th Mar 17
Stock Market VIX Cycles Set To Explode March/April 2017 – Part II - 23rd Mar 17
Is Now a Good Time to Invest in the US Housing Market? - 23rd Mar 17
The Stock Market Is a Present-Day Version of Pavlov’s Dog - 23rd Mar 17
US Budget - There’s Almost Nothing Left To Cut - 23rd Mar 17
Stock Market Upward Reversal Or Just Quick Rebound Before Another Leg Down? - 23rd Mar 17
Trends to Look Out For as a Modern-day Landlord - 23rd Mar 17
Here’s Why Interstate Health Insurance Won’t Fix Obamacare / Trumpcare - 23rd Mar 17
China’s Biggest Limitations Determine the Future of East Asia - 23rd Mar 17
This is About So Much More Than Trump and Brexit - 23rd Mar 17
Trump Stock Market Rally Over? 20% Bear Drop By Mid Summer? - 22nd Mar 17
Trump Added $3 Trillion in Wealth to Stock Market Participants - 22nd Mar 17
What's Next for the US Dollar, Gold and Stocks? - 22nd Mar 17
MSM Bond Market Full Nonsense Mode as ‘Trump Trades’ Unwind on Schedule - 22nd Mar 17
Peak Gold – Biggest Gold Story Not Being Reported - 22nd Mar 17
Return of Sovereign France, Europe’s Changing Landscape - 22nd Mar 17
Trump Stocks Bull Market Rolling Over? You Were Warned! - 22nd Mar 17
Stock Market Charts That Scream “This Is It” - Here’s What to Do - 22nd Mar 17
Raising the Minimum Wage Is a Jobs Killing Move - 22nd Mar 17
Potential Bottoming Patterns in Gold and Silver Precious Metals Stocks Complex... - 22nd Mar 17
UK Stagflation, Soaring Inflation CPI 2.3%, RPI 3.2%, Real 4.4% - 21st Mar 17
The Demise of the Gold and Silver Bull Run is Greatly Exaggerated - 21st Mar 17
USD Decline Continues, Pull SPX Down as well? - 21st Mar 17
Trump Watershed Budget - 21st Mar 17
How do Client Acquisition Offers Affect Businesses? - 21st Mar 17
Physical Metals Demand Plus Manipulation Suits Will Break Paper Market - 20th Mar 17
Stock Market Uncertainty Following Interest Rate Increase - Will Uptrend Continue? - 20th Mar 17
Precious Metals : Who’s in Charge ? - 20th Mar 17
Stock Market Correction Continues - 20th Mar 17
Why The Status Quo Is Under Increasing Attack By 'Populist People Power' - 20th Mar 17
Why the SNP WILL Destroy Scotland, Exit UK Single Market for EU - IndyRef2 - 19th Mar 17
Crypto Craziness: Bitcoin Plunges on Fork Concerns, Steem Skyrockets and Dash Surges Above $100 - 19th Mar 17
What ‘Ice-Nine’ Means for Your Money - 19th Mar 17
Stock Market 4 Year Cycle - 18th Mar 17

Market Oracle FREE Newsletter

Elliott Wave Trading

The UK Auto Market Is Booming, So Is It a Sign of Economic Recovery?

Economics / UK Economy Mar 29, 2016 - 06:53 PM GMT

By: Nicholas_Kitonyi

Economics

The UK has been one of those economies that cannot exactly be classified as recovering or struggling over the last couple of years. To put it clear, the UK economy has not been as good as the US economy in terms of growth amongst the developed countries or as bad as the Euro Zone.

The UK economy has been more or less stuck in the past few years with no significant movement either side of the growth curve. Nonetheless, one of the country’s key performance indicators in the manufacturing industry has shown some significant improvement, and recent numbers suggest that things could even get better in 2016 and 2017.


The UK car manufacturing output increased by 4% last year from 2014 and is now on course to post a double-digit growth for 2016 from the 2015 numbers. In February, the UK car manufacturing output jumped 13% from the same period last year while the year-to-date growth rate for the two months stood at 10%.

UK car market set to make history

According to the Society of Motor Manufactures and Traders, 146,955 cars were built in February, that is, 17,000 more than the number of cars built in February last year. This took the total number of cars built in the UK this year to 284,907. The number of cars sold last month meant that on paper, no inventory was left after exporting 104,880 and selling 42,075 in the domestic market for a total of 146,995.

Mike Hawes, SMMT chief executive, said: "The UK automotive industry's impressive growth continued into February, with demand from both domestic and overseas customers showing no signs of slowing. The outlook for the sector is bright, but much will depend on global political and economic conditions in the months and years to come."

Now, based on the current figures, the UK car automotive industry is on course to manufacture more than two million cars next year. This compares to about 1.6 million cars manufactured last year. The figure will also set a new record for the number of cars manufactured in the UK in a single year since the 1972 figure of 1.92 million.

Can UK car manufacturing numbers spur economic growth?

The overall UK economy relies on several factors, which means it would be naïve to assume that the current growth in car output could be mirroring the actual economic growth of the four member nations. Nonetheless, this could have a positive impact on other aspects of the economy. More sales means increased production, which in turn should create more employment opportunities and, or better wages.

In addition, this could also trigger a chain reaction whereby other companies like those involved in lending see increased activity. Cars play a major role in the lending industry in the UK as people use their logbooks to apply for credit. As such, elogbookloan a UK logbook loans company could see increased activity, which in turn could lead to an increment in private investments. Generally, when people borrow money to invest, this is likely to have a positive impact on the overall economy.

As of December 2015, the UK government had significantly reduced borrowing compared to the same period in the preceding fiscal year. However, with inflation still remaining low at about 0.3% below the target level of 2% and Bank of England base interest rate pegged at 0.50%, the credit market is still very attractive to borrowers.

Investors borrowing money now can easily invest it at attractive prices due to low inflation rates while the target of 2% level means that there is opportunity to gain massively should inflation rates reach that target.

The good news is that the car market appears to have set the stage for what is to come and given the fact that cars are seen as luxurious commodities even in the developed markets, the growth in the auto industry in the UK could be signaling a promising future for the overall economy.

Conclusion

Illustratively, the UK domestic car purchases numbers grew by nearly 25% in February, which compares to the car exports growth rate of about 9.1%. Again, this demonstrates that the UK car market could be set to start a chain reaction that could see the UK economic recovery reach another gear.

However, as mentioned, the UK car industry is just one fraction of a huge pie when it comes to factors that drive the UK economy. For instance, demand for clothing, which is part of the gigantic retail market in the UK fell by 0.4% sequentially last month while considerations for Brexit (Britain existing from the EU)could also cause a stutter in the UK economic recovery despite Moody’s ‘small impact prediction’.

By Nicholas Kitonyi

Copyright © 2016 Nicholas Kitonyi - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife