Only seven countries saw production above 80% capacity utilization last year, a commonly understood measure of good health: Indonesia, Japan, the U.S., Germany, Turkey, Mexico and Canada.
OECD forecasts 4% falloff in French market.
PARIS – The automotive industry in France and Spain could contract through 2014, according to analysis by the OECD, the Paris based global economic policy forum.
While production is growing globally, the organization says in its 2013 economic outlook published today that sales in France and Spain “are likely to continue to decline over 2013-2014 on average, reflecting low growth prospects and expected increases in unemployment.”
Globally, car demand in the 34 economically developed countries belonging to the OECD remains 11% below the pre-crisis level of 2007, says the organization, which provides analysis and advice to its member nations.
The OECD projected automotive market trends for eight countries, predicting an annual 12% decline in Spain through 2014 and about a 4% falloff in France. The organization also expects declines in Japan and the U.K., following growth spurts in 2012.
Both of those countries have devalued their currencies, increasing the price of imports, and in Japan sales grew thanks to government subsidies for efficient cars.
In Italy, which also is suffering, the OECD projects a return to growth of about 2% annually through 2014, stabilizing “at a level significantly below pre-crisis levels.”
Capacity utilization in Italy was less than 40% last year, according to LMC Automobile data quoted by the OECD, the worst of 20 car-producing countries.
Only seven countries saw production above 80% utilization, a commonly understood measure of good health: Indonesia, Japan, the U.S., Germany, Turkey, Mexico and Canada. The latter two were near 100%. Brazil, Russia, India and China, the BRIC nations, produced at 60%-70% capacity.
Overall, demand for cars likely will remain subdued in advanced OECD countries, the organization predicts. The declines foreseen in European countries and Japan are balanced by projected growth in the U.S. and Canada, “but possibly at a slower pace compared with the past two years.”
The OECD forecasts growth in the U.S. and Canada at about 2.5% annually through 2014.
However, the organization projects a continued strong rise in major emerging-market countries “on the back of low car ownership and strong income growth.
“Car plants established in advanced OECD countries may benefit only to a limited extent from this additional demand, because trade flows are largely concentrated within large regional markets,” the report adds. “Overall, developments of car demand over the near-term future are unlikely to significantly reduce the excess capacity observed in many OECD countries.”
OECD economists calculate their forecasts using established relationships between new-light-vehicle sales, gross domestic product per capita, population, unemployment and real oil prices.
The forecasts, however, are “surrounded by uncertainty,” the organization says. “In particular, they are based on a simple estimated relationship, which does not specifically take into account the possible influence of omitted factors, such as financial conditions, on car demand.
“They should thus be interpreted as indicators of the future prospects of demand, even though in most cases they are broadly in line with projections from private car-market analysts.”
The 246-page economic outlook supports the view that the overall economy in the U.S. “has undergone significant adjustment, which is beginning to bear fruit. The combination of a repaired financial system and a revival in confidence is driving growth.
“Private-sector demand is stabilizing as household deleveraging is far advanced, house prices are rebounding and wealth accumulation is supporting consumption. Employment is growing, adding to confidence.”
The report credits the U.S. for acting decisively “to recapitalize banks and ease monetary policy aggressively” when economic imbalances brought on the crisis.
“In contrast,” says the report, “countries that had built up large imbalances inside the euro area, with its incomplete institutional setup and weak bank capitalization, have been mired in recession against the background of imperfect monetary policy transmission, large fiscal consolidation needs and fears of break-up.”
The OECD expects real GDP growth in the U.S. will be 1.9% this year and 2.8% in 2014. The eurozone will fall 0.6% this year, after a decline of 0.5% last year, before a weak rebound in 2014 to 1.1% growth, the group says. It projects growth in China of 7.8% this year and 8.4% in 2014.