Insert your own green light / accelerating away / high speed metaphor here.

Vehicle sales in South Africa grew by 14.1 per cent in January (year on year) according to numbers released on Monday – a rare piece of positive economic data from a South African economy which has been showing signs of slowing growth.

The 55,007 vehicles sold in January 2013 was an increase of 6,805 over January 2012 sales, according to the National Association of Automobile Manufacturers of South Africa (NAAMSA), and a marked improvement on the 1.8 per cent year-on-year growth recorded in December. January’s growth in vehicle exports was up strongly by 49.9 per cent to 17,399.

Economic news from South Africa so far this year has been almost unremittingly grim, with multiple signs of slowing growth and the rand standing out as one the worst performers among the world’s major currencies. So the vehicle sales might come as something of a surprise.

In a statement NAAMSA attributed the improvement to:

the low interest rate environment, replacement demand, the highly competitive trading environment with attractive incentives, low debt servicing costs, high technology new model introductions and strong demand by car rental companies.

The strong export figures signal the benefits which might be derived from a devalued currency, and NAAMSA said it expects vehicle exports to continue growing in 2013.

However, a weaker exchange rate pushing up vehicle prices in combination with inflationary pressures eating into consumer spending power could spell trouble for domestic sales in the longer term. Absa Capital pointed out in a note on Monday that January’s impressive growth should be taken in a broader context:

Sentiment was very weak in December 2012, leading up to the ruling party’s elective conference and some improvement in January was likely after the smooth passing of this conference, releasing some pent-up demand in the process … Despite the rebound in January, the 55,007 units sold during the month are still short of the recent cycle peak of 57,884 reached in October 2012.

As the chart below shows, short-term swings in vehicle sales might sometimes disguise long-term trends. The current trend is up, with the twelve-month rolling average of total vehicle sales rising to 11.1 per cent year on year from 9.7 per cent, according to Absa Capital, but overall sales still remain well below pre-crisis levels.

Related reading:
S Africa: more data gloom, beyondbrics
Falling rand: look on the bright side? beyondbrics

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