Confidence upswing points to better times

CONFIDENCE is a crucial part of the car-buying process. You are unlikely to invest in a new car if you are worried about the prospect of losing your job.

This is why most car companies keep a close eye on consumer confidence surveys that, with a range of other data, give the best possible idea of what customers are thinking.

Most car-makers contacted by GoAuto regularly monitor consumer confidence, many checking the results weekly.

Consumer confidence ratings measure the general optimism of customers. Customers are asked about their view of the economy and if it is a good time to buy major household items. While it is not car specific, it is a seen as a good general guide.

Roy Morgan Research’s comprehensive consumer confidence survey shows consumer confidence has been steadily increasing since March, with more Australians confident the country is on its way out of the current economic gloom.

Measured in points, the survey in mid August stood at 122.6 points, holding most of its gains in a healthy jump in July.

That July leap restored the confidence figure to the good old days of December 2007, before the terms ‘credit crunch’ and ‘global financial crisis’ hit the headlines.

Back then, consumer confidence had been riding high for all of 2007, with several months of more than 125 points, before taking a massive dive in early 2008 as the stock market fell.

That plunge continued for six months before bottoming out at 90.7 points in June last year.

Despite the pessimism throughout the first quarter of 2008, Australian Bureau of Statistics trend data shows it took a few months for the negativity to hit new-car showrooms.

The slide slowed in February this year and started to recover ever-so-slightly by April – the time of the last ABS report.

Using VFACTS sales data and ABS methodology (which irons out the seasonal ups and downs), GoAuto calculates that the trend line will have risen through to July.

June 2009 was a strong month for car sales, down just 3.5 per cent on the previous June, but the considerable government business tax incentive no doubt boosted the result.

So what does the new-found confidence mean for car sales going forward?A gambler would probably take a punt that the optimism, if continued in line with more positive economic news, would flow through into car sales.

Whether car companies are prepared to take the punt, increase orders and risk being weighed down with excess stock if that doesn’t happen, remains to be seen.