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Australia's auto sector suffers earnings hit as consumer spending slows

Auto News - Published on Fri, 15 Feb 2019

Image Source: ET Auto
Reuters reported that Australia's auto sector has become the latest casualty of slowing consumer spending and tighter lending, with classifieds site Carsales.Com Ltd and parts dealer Bapcor Ltd turning in weak earnings and seeing their shares drop.

Retail spending data, which does not include car sales, had its worst quarter in a year in December and has been on investors' radar since the central bank last week downgraded its economic outlook and raised the possibility of an interest rate cut to stimulate growth.

Half-year results at Carsales, which posted a profit drop and decline in new-car display ads, and Bapcor, which reported a slowdown in sales growth, are the latest figures illustrating the deepening financial fallout of consumers hitting the brakes.

Analyst Tom Piotrowski at Commonwealth Securities said that "People will be joining the dots on a range of things" in the wake of the central bank's downgrade. The moderation in house prices is a fundamental driver of consumer sentiment and now that washes out in to the practical examples of people being more likely to sell a car rather than buy one.”

In the case of auto sales, tougher loan requirements at banks and a once-in-a-generation downturn in property prices - which tends to make consumers save more and spend less - have also weighed on sentiment and made credit much harder to access.

Classifieds site Carsales posted an 82 percent plunge in profit to AUD 11.5 million (USD 8.1 million) for the six months to Dec. 31 as sales costs rose and because it impaired its half-stake in finance broker Stratton in response to regulatory change.

Display advertising, mostly purchased by dealers selling new cars and which a year earlier comprised 18 percent of total sales, slumped 16 percent to AUD 29.9 million.

Source :

Posted By : Joykumar Irom on Fri, 15 Feb 2019
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