Is the auto industry climbing back up the mountain or tripping over an anthill?

With the release of the October figures from ABS the automotive industry looks as if it’s turning around. October marked the third consecutive month of growth with a 3.7% increase for new car sales. Encouraged by the extension of the small to medium business tax rebate, business’s rather than consumers seem to be fueling this sales resurgence.

This is positive news when compared to our British counterparts who sustained a drop of 6.7% in new car production compared to October 2008. However the question is whether or not the figures are simply a result of the government incentives or a real trend. The Australian Bureau of Statistics has suspended its trend analysis until next year as they believe the figures are not representative of the underlying buying behavior in the market.

This skepticism is not felt by the Reserve Bank of Australia who have announced the third interest rate rise in as many months, based partly on the positive growth in the auto industry.

When talking about a push for another interest rate rise, CommSec economist Savanth Sebastian said “I think they’d (The Reserve Bank of Australia) be well aware the car industry has turned the corner - car sales are improving, confidence is improving - it just gives them confidence the economy is on the mend.”

With fuel prices at a 3 month high it seems that as per usual the fuel companies and reserve bank are jumping the gun, playing the coy optimists they so often do. Is this resurgence just inflated by Rudd’s overzealous spending or is it a real change in the Australian public’s buying behaviour?

Please leave your thoughts in the comments section.

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