Best of the Week
Most Popular
1.Crude Oil Price Trend Forecast 2016 Implications for Stock Market - Nadeem_Walayat
2.Odds of Winning Walkers Crisps Spell & Go olidays K, C and D Letters - Sami_Walayat
3.Massive Silver Price Rally During The Coming US Dollar Collapse - Hubert_Moolman
4.Pope Francis Calls For Worldwide Communist Government - Jeff_Berwick
5.EU Referendum Opinion Polls Neck and Neck Despite Operation Fear, Support BrExit Campaign - Nadeem_Walayat
6.David Morgan: There Will Soon Be a Run to Gold Like You've Never Seen Before - Mike Gleason
7.British Pound Soars on BrExit Hopes Despite Remain Establishment Fear Mongering - Nadeem_Walayat
8.Gold Price Possible $200 Rally - Bob_Loukas
9.The Federal Reserve is Not Going To Raise Interest Rates and Destroy Gold - Michael_Swanson
10.Silver Miners’ Q1’ 2016 Fundamentals - Zeal_LLC
Free Silver
Last 7 days
“Debt, Not The Economy, Reaches Escape Velocity” With Graham Mehl - 29th May 16
EU Referendum, Black Vote LEAVE or REMAIN? Which is Worse for Racism for Britain's Ethnic Minorities? - 29th May 16
Billionaire Gross: Jubilee Debt Relief as Prelude to New Global Economic Order - 29th May 16
Wargaming North Korea - Assessing the Threat - 29th May 16
EU REMAIN Population Forecasts - England 4.1 million Explosion, London Migration Crisis - 28th May 16
A Guide to the Trump-Sanders Debate - 28th May 16
Gold And Silver – At Significant Support. New “Story” Developing - 28th May 16
The Next Systemic Lehman Event - New Scheiss Dollar & Gold Trade Standard - 27th May 16
Energy and Debt Crisis Point to Much Higher Silver, Metals Prices - 27th May 16
Gold Junior Stocks Q1 2016 Fundamentals - 27th May 16
These Crisis Markets Are Primed to Deliver Big Gains, Platinum Never Cheaper! - 27th May 16
Operation Black Vote BrExit Warning for the Wrong EU Referendum - 27th May 16
UK Immigration Crisis Hits New Extreme, Catastrophic ONS Migration Stats Ahead of EU Referendum - 27th May 16
Many of the World’s Best Investors Made Their Fortunes This Way…And You Can Too - 27th May 16
The Ugly Truth About Stock Market Manipulation and Gold Prices - 27th May 16
Gold Price Looking Vulnerable While Gold Stocks Correct - 27th May 16
The 5 Fatal Flaws of Trading - 27th May 16
The Next Big Crash Of The U.S. Economy Is Coming, Here’s Why - 27th May 16
A New Golden Bull or Has the Market Gone Too Far Too Fast? - 27th May 16
It Feels Like Inflation - 26th May 16
Negative Interest Rates Set to Propel the Dow Jones to the Stratosphere? - 26th May 16
S&P Significant Low has Occurred – Not Likely! - 26th May 16
Statistics for Funeral Planning in UK Grave - 26th May 16
Think Beyond Oil And Gold: Interview With Mike 'Mish' Shedlock - 26th May 16
Hard Times and False Mainstream Media Narratives - 26th May 16
Will The Swiss Guarantee 75,000 CHF For Every Family? - 26th May 16
Is There A Stocks Bear Market in Progress? - 26th May 16
Billionaires Are Wrong on Gold - 26th May 16
How NOT to Invest in the Gold Market - 26th May 16
The Black Swan Spotter...Which Saw the Oil-Crash coming; now says the “Invisible Hand” will push Brent to $85 by Christmas - 26th May 16
U.S. Household Debt Still Below 2008 Peak - 25th May 16
Brexit: Wrong Discussion, Wrong People, Wrong Arguments - 25th May 16
SPX is at Strong Resistance - 25th May 16
US Dollar, Back From the Grave? - 25th May 16
Gold : Just the Facts Ma’am - 25th May 16
The Worst Urban Crisis in History Could be Upon Us - 24th May 16
Death Crosses Across The Board Are IRREFUTABLE Stock Market Sell Signals - 24th May 16
Bitcoin Trading Alert: Bitcoin Price Stays below $450 - 24th May 16
Stock Market Crash Death Cross Doom Prevails - 23rd May 16
Did AMAT Chirp? Implications for the Economy and Gold - 23rd May 16
Stocks Extended Their Rebound On Friday - Will They Continue Higher? - 23rd May 16
UK Treasury Propaganda Warns of 3.6% Brexit Recession, the £64 Billion Question? - 23rd May 16
Stock Market Support Breached, But Not Broken! - 23rd May 16
George Osborne Warns of 18% Cheaper House Prices - BrExit for First Time Buyers - 22nd May 16
Gold Bull-Phase I Continues to Confound (The Trek to “Known Values”) - 22nd May 16 r
Avoiding a War in Space - 22nd May 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Why 95% of Traders Fail

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