Consumers slam the brakes on spending

Will the next generation know the joy of that new-car smell? We only ask because new figures from the snappily-named Society of Motor Manufacturers and Traders have suggested that the number of new cars being sold in the UK is dwindling. New registrations in September (the month which usually makes up one in five new car purchases a year) were down 0.8% on the year before, with just 332,476 sold. That means the UK’s car market will drop by 5% compared to last year’s performance. Which is reflected in household spending figures, too.

According to the SMMT, the original expectation was that in 2012, purchases of new cars would rise by 5% on this year’s figures. But that’s now been revised down, so they’ll edge just ahead of the 1.92m units it expects to sell this year, to 1.96m. That consumer caution is also reflected in the types of car that made up September’s car Top of the Pops list: among the top 10 are nice, sensible runarounds like the Ford Fiesta and the Ford Focus. Very austerity chic…

The good news is that car manufacturers (ie. the ones who should be getting the economy going again by exporting their wares) aren’t feeling the pain – largely because the kinds of brands that are made in the UK (Jaguar Land Rover, Aston Martin, Rolls Royce, Bentley) aren’t the sort of thing UK consumers are interested in anyway. Although Nissan, Honda and Ford all have plants in the UK. In fact, with eight out of 10 of their vehicles sold overseas – and particularly to emerging markets like China, India and Russia, where the newly-rich middle classes are eager to splash their cash – production in the UK is set to rise from 1.5m cars this year to 1.6m in 2012. Not bad.

Still: there’s no doubt that household spending is falling. Figures from the Office of National Statistics showed that spending on essentials – ie. food, petrol, clothes etc – has fallen to its lowest level in almost 10 years. Apparently, in the three months to June, consumers spent £620m less than during the same period last year (that works out at £30 a household), with total spending on food dropping to £18.6bn, its lowest level since spring 2002.

Admittedly, that fall is largely thanks to shoppers switching from the likes of Tesco’s Finest to own-brand ranges – so at least no-one’s going hungry – but it does suggest that the next few months are going to be bleaker than originally expected…