German sales recovery will lift European car market in 2014

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A strong increase in January car sales in Germany bodes well for western Europe as a whole for 2014, according to market analyst LMC Automotive.

In January, 206,000 cars were sold in Germany, up 7 percent on the same month last year.

The seasonally adjusted annualized rate (SAAR) of sales indicated by the first month suggests the improvement for the year as a whole for Europe's largest market is likely to be a more modest 6 percent. That, however, would still bring the market comfortably back above the 3 million mark.

LMC believes that this recovery will be supported by a solid pick up in the German economy and consumer confidence.

The UK car market -- the star performer in 2013 -- also continued to progress strongly in January. Sales there rose 8 percent year-on-year to 155,000 units. As in Germany, growth is being supported by low interest rates, improved consumer confidence and better economic activity.

Europe's third-largest market, France, only achieved a 1 percent gain to 125,000 units, while the next largest, Italy, improved 3 percent to 118,000 units. The analysts are more pessimistic about the outlook for these two markets, noting that the SAARs for both reflect difficult economic conditions that continue to be endured.

The Spanish market, Europe's fifth largest, continues to progress, up 8 percent in January to 54,000 units thanks to continued government support through a regional vehicle scrappage scheme.

LMC believes, however, that "until unemployment rates begin to fall from the lofty levels currently seen in Spain, any serious improvement in the car market will likely be postponed."

For western Europe as a whole LMC Automotive notes that car registrations in January 2014 were up 5 percent to 901,000 units compared with a year earlier.

Although the SAAR was a little weaker than in the preceding month, mainly for technical reasons, LMC is still forecasting that sales for the full year will improve by about 3 percent to 11.9 million units.

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