Car Registrations Back off in Europe and Raise Questions

Car registrations in Europe fell by 4.2% in June after a 1.4% decline in May. Over three months registrations are falling at a 4.2% annual rate, over six months they are falling at an 8.8% annual rate and over 12 months they are falling at a 0.9% annual rate.

These growth statistics tell a pessimistic story of the path of European car sales. However, the chart would suggest that sales may still be in a very shallow uptrend, albeit at levels of registrations that are far below historic standards. However, the chart is also consistent with a more pessimistic reading.

In Germany, sales fell sharply in June, dropping by 5.5% and plunging the three-month annualized growth rate, to -13.7%. Germany now has a set of sequential growth rates that indicate a clear deteriorating trend.

In France, registrations grew by 0.2% in June after a 1.7% decrease in May. France has a three-month annualized growth rate that is positive at 1.7%. That growth rate upends what was a developing and deteriorating trend for car registrations over six months and 12 months. Still, it does not clarify the path of future registrations in France.

In Italy, sales grew by 1.4% in June after a 1.6% advance in May. Still, over three months registrations in Italy are falling at a 7.7% annual rate. That's worse than its -0.8% rate over 12 months. However, the six-month growth rate for Italy is positive at 15.3%. Italy's trends are therefore convoluted and their future path is unclear.

In Spain, the fourth largest euro area economy, registrations grew by 0.1% in June after a 7.4% decrease in May. Still, because of a huge surge in April, the three-month annualized growth rate for registrations in Spain is 62.9%. The six-month growth rate is 42.9% and the 12-month growth rate is 17.9%. Spain is clearly an exception to these other European trends. Its performance is exceptional. The key is that after registrations jumped in April, they held most of that ground with only moderate backtracking.

The United Kingdom has had strong auto registrations throughout this recovery, but recently registrations have become very volatile. Sales fell by 0.3% in June, the same as it May. Due to a sharp drop in April, the three-month annualized growth rate for the UK is at -24.1%. Still, the six-month growth rate for the UK is a positive 1.5% and over 12 months UK registrations are up by 5.8%.

It's hard to put a very positive spin on the car registration data for Europe. All countries except Spain exhibit a great deal of weakness in registrations and in trends at some point in recent months. The weakness in car registrations goes hand-in-hand with other signs of weakness that we have seen, stemming from industrial output to consumer confidence to industrial sentiment across all euro area countries. Car registrations are another dataset warning us about the potential for a growth slowdown in Europe.