Car sales hit by flagging economy

The launch of the new car registration plate this month will be eagerly anticipated by the struggling car industry after it recorded the weakest August for new motor sales since 1966.

But there are fears that consumers hit by rising food and energy prices brought on by the economic downturn may be reluctant to splash out on new cars carrying the '58' plate.

Sales of new cars dropped 18.6% year-on-year to 63,225, according to the Society of Motor Manufacturers and Traders (SMMT).

The group predicts new plate sales - which normally see September account for 17% to 18% of the entire year's new car registrations - will drop by about 7.5%.

Both used and new car markets are now feeling the effects of the credit crunch, with Nottinghamshire-based dealership Pendragon admitting it had seen the biggest single monthly reduction in used car prices for five years in June.

Lookers of Manchester also said new and used car sales dropped by 6.5% and 5% respectively in the first six months of the year.

Mike Allen, car analyst at Panmure Gordon, said: "While falling fuel costs is no doubt good news for the industry, there will be a lag effect and it will not be enough to stimulate consumer demand, a trend which is deteriorating aggressively rather than showing any signs of recovery."

Copyright © PA Business 2008