Recession Watch: New Car Sales and Production Slump

New car sales and production are falling in the UK - further evidence of a growing risk of recession.

Many see the car market as a leading indicator for the macroeconomy. A drop in new sales feeds through to lower production and output throughout the vehicle supply-chain. The number of new cars sold in the UK was down by 10% in June 2022.

Why are new car sales dropping?

• Production delays – global semi-conductor shortage
• Falling real incomes – new cars have a positive income elasticity of demand
• Rising interest rates – makes an unsecured car loan more expensive to finance
• Steep drop in consumer confidence
• Rise in petrol & diesel prices and a continued climb in average car insurance costs