Car demand down in July

The month of July saw a 13 per cent decline in new car registrations, reflecting the continuing degeneration of consumer confidence right across the economy.

"Rising fuel and household bills, alongside falling house prices are making consumers reluctant to commit to new expenditure," said Paul Everitt, SMMT chief executive.

"Vehicle manufacturers are doing their bit to support consumers. New cars are now 22 per cent more affordable than they were ten years ago and new technology is delivering more fuel efficient motoring

"Industry needs the support of government in order to encourage the uptake of lower-emitting vehicles and ultimately lower the cost of motoring for consumers."

The new car market was down by 13 per cent in July, making the yearly rise so far a depressing three per cent.

Diesel registrations, however, were up 7.3 per cent over the year-to-date, taking up 43.1 per cent of the market.

Alternatively fuelled vehicles were in demand, with 19.4 per cent of people registering them in July (1,479 units registered).

July was the third successive month of falling registration numbers, volumes down 7.4 per cent in that period.

Commenting on the findings, Howard Archer, chief UK and European economist with Global Insight, said: "High petrol prices are likely to be hurting sales of new cars as a significant number of people look to cut back on their driving.

"Even allowing for this though, markedly deteriorating car sales is a further clear sign that consumers are increasingly cutting back on their spending.

"Many consumers are doing this out of necessity due to squeezed purchasing power, but it is also likely that many are retrenching out of choice reflecting serious concerns about the economic situation and outlook. In particular, consumers are becoming increasingly reluctant, or unable, to splash out on big ticket items.

"We expect consumers to continue to retrench. Muted disposable income growth, a serious squeeze on purchasing power coming from sharply rising utility bills and elevated food prices, higher mortgage repayments for many householders as a result of the credit crunch, falling house prices, major concerns over the economy, higher debt levels and increasingly rising unemployment are all dampening factors for consumer spending.

"Furthermore, current elevated inflation levels and risks mean that the Bank of England seems unlikely to cut interest rates again any time soon, and there remains a serious possibility that it could even raise them. This will do little for consumer confidence and spending intentions. Indeed, both GfK NOP and Nationwide reported that consumer confidence fell to survey lows in July."