Car sales soar as growth in credit holds up

NEW CAR sales rose by nearly a fifth last month compared with November 1992, suggesting that the sustained but unspectacular recovery staged by the market over the past year may now be gathering real momentum.

The 19.5 per cent increase in registrations to 127,674 was much better than expected and puts car sales on target to reach 1.78 million this year - nearly 180,000 up on 1992.

Rising demand for new cars also meant that consumer credit in October notched up the second-highest monthly increase in two years.

Commenting on the car sales figures, Roger King, director of public affairs at the Society of Motor Manufacturers and Traders, said: 'This increase in registrations is quite startling. It illustrates once again the determination of Britain's motor industry to drive economic recovery forward.'

There had been fears that buyers might hold off from making purchases last month until the level of Budget tax increases became known. In the event, the motor industry escaped largely unscathed, although the increases in fuel duty were higher than expected.

Alan Pulham, director of the National Franchised Dealers Association, said: 'Following the Budget, new car buyers can be quite clear and confident that there are no longer any nasty fiscal surprises waiting for them, leading to delays in buying decisions. The market for 1994 therefore looks set to improve.'

He warned, however, that much of the sales increase was due to intensive and not always profitable marketing efforts by manufacturers. Ford, the market leader, will announce a new marketing and finance initiative this Thursday.

Although the pounds 311m increase in the level of credit advanced in October was down on September's abnormally high pounds 489m rise, it was consistent with a broad upward trend in consumer spending.

On a three-month basis, usually a better guide to the underlying trend, net lending to consumers rose by pounds 1.025bn. This was almost double the rise in the three months to July.

The October rise in net consumer credit - which excludes mortgages and bank overdrafts - reflected a net pounds 349m increase in loans from finance houses and specialist credit guarantors, which analysts said was due to demand for new cars. By contrast, consumers repaid a net pounds 31m in credit card debt and pounds 7m in building society loans.

Analysts said the figures pointed to continued growth in consumer spending. Adam Cole, of James Capel, said: 'The trend is still strongly upwards. It continues to suggest that consumer spending is driving the recovery firmly forward.'