CHINESE DEMAND FUELS AUTO SALES

Global car sales will grow by 4.8 per cent next year pulled by unexpectedly strong demand in China, the credit rating agency Moody's forecast today. In a report, Moody's also upgraded its estimate for growth of the world car market this year to 3.2 per cent. The agency said that the Chinese car market was growing faster than gross domestic product in the Asian economic powerhouse. Consequently it was revising upwards its estimate for the growth of Chinese demand for cars to 10.0 per cent from an estimate in January of 7.0 per cent, for both this year and next. Moody's held to its forecast that the car market in Europe would contract by 5.0 per cent this year from the 2012 level. The agency said that in 2014 the European market would rally by 3.0 per cent, but this was a downgrade from a previous estimate of growth of 5.0 per cent next year. Another study by auditing and consultancy group PwC in August said that the global car market would expand in the next few years, mainly because of growth of demand in China where sales were expected to double by 2019. Moody's said that the outlook for demand for new cars in Brazil was clouded by a context of increased interest rates, high inflation and growing household debt. There were also risks for the future of demand in Russia. European suppliers of new equipment to the car industry depended on these markets to limit losses in western Europe where weak demand and over-capacity would continue to weigh on the margins of French manufacturers Peugeot Citroen, and on Fiat of Italy, Moody's commented. The margins of German suppliers for the manufacture of new cars would continue to fall, but margins for Japanese automakers would be boosted by the fall of the yen. Automakers in the United States should be able to maintain their margins in the next 12-18 months, but these could be slightly compressed by increased competition and by a slowing of growth of the US economy, Moody's said.