UK car sales increase to a nine-year high

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LONDON (Reuters) -- UK new-car sales reached a nine-year high in the first six months, rising 11 percent to 1.3 million.

Although growth slowed in June as consumer demand started to level off, the result is the best first half since 2005, industry association SMMT said today in a statement.

Registrations in June increased by 6 percent to 228,291.The Ford Fiesta and Vauxhall Corsa subcompacts were the two best-selling cars in June, followed by the Ford Focus and Volkswagen Golf compacts at No. 3 and No. 4 respectively. Fifth place was taken by Vauxhall’s Astra compact.

"The overall market has risen faster than we were expecting but, after a bumper March, growth is showing signs of stabilizing around our forecast level," Mike Hawes, SMMT chief executive, said in the statement.

Analysts say record low interest rates and a recovering economy have given UK consumers the confidence to buy more big ticket items. But sluggish wage growth could be a challenge, in particular if interest rates begin to rise. The Bank of England has indicated this could happen as soon as this year.

"One concern for car manufacturers is that current muted earnings growth threatens to be a constraint for car sales," Howard Archer, chief UK economist at IHS Global Insight said.

Car sales slowed from increases of 7.7 percent in May and 8.2 percent in April.  Barclays, which provides finance to car buyers and dealers, said it had seen anecdotal evidence that this trend would continue.

Full-year forecast

Still, the SMMT said the market was on track for 2.4 million new-car registrations in 2014, up more than 6 percent on last year.

The UK’s monthly rise followed higher sales in Europe’s other major markets. Sales in Germany declined 2 percent in June, but after factoring in lost working days, car sales actually rose slightly, the VDA industry association said on Wednesday. In France, registrations grew 3 percent in the month, while in Italy sales were up 4 percent. In Spain, sales jumped by 24 percent.

Ford in front
Six-month UK car sales, with percentage change over 2013
1.Ford 173,554 +6%
2.Vauxhall 141,609 +7%
3.Volkswagen 110,666 +9%
4.Audi 83,761 +14%
5.BMW 75,122 +5%
Source: SMMT

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