ECONOMY

August car sales down, consumers still spending

New vehicle registrations in August were down by nearly a fifth while the decline in the first eight months of the year was less severe, data from the National Statistics Service (NSS) showed yesterday, indicating that the prolonged consumer bull run could be finally losing steam. Vehicle sales last month tumbled by a hefty 18 percent to 28,072, while in the January to August period, sales fell by 7.4 percent. Passenger car sales, an important indicator of consumer spending, dropped by nearly 10 percent in August, traditionally a month of slow sales as consumers go on vacations. Sales in the first eight months of the year were down 7.5 percent. Economists said the slowing pace of car sales is not a cause for concern as figures are being compared with above-trend car sales in the last two years. Fueled by the stock market boom and falling interest rates, Greeks went on a car-buying spree in 1999 and 2000. At the height of the stock market bubble in 1999, car sales went up by a stunning 47 percent. Car sales have since then come down to more normal levels, although negative growth has been more the norm. Sales in the first quarter of the year showed a 10-percent decline, improving to a 6-percent fall in the second quarter. Despite slowing car sales, consumer spending has continued to remain resilient, though at a more gradual pace. According to NSS data released earlier this week, final consumption in the second quarter of the year grew by just 1.6 percent year-on-year compared to a 3.6-percent rise in the first quarter. Buoyant retail sales, on the other hand, showed the momentum might be slowing but consumer spending continued to remain at above-average levels. The revised retail sale index in June showed a strong 9.7-percent, year-on-year gain. This year’s package of tax benefits, together with low interest rates, is expected to support household consumption in the second half of the year, EFG Eurobank Ergasias said in a research note yesterday. It also pointed to the rising inflow of EU structural funds and ongoing infrastructure projects connected to the 2004 Olympic Games as factors expected to keep the Greek engine of growth roaring ahead of other EU member states. Contrary to EU recommendations, Greece has failed to curb spending and has relied on increased revenue to produce surpluses. Early projections show spending increasing by almost 6 percent next year, double the expected rate of inflation.