On the road to recession

Canada's slumping auto sales aren't as bad as in the U.S.

Canadian retail sales were down 0.6 per cent in July, largely dragged down by sluggish sales at car dealerships, which fell 3.4 per cent in that month. That’s bad news for an industry that had been relatively stable over the past year—but still relatively minor compared to the auto crisis now unfolding south of the border. “The problem is in the U.S.,” where the vehicle sector looks headed for a double-dip recession, says automotive consultant Dennis DesRosiers.

With “dismal sales” from May through September, the U.S. auto industry will soon have experienced two consecutive quarters of negative growth, DesRosiers says, the hallmark of a recession. Canada certainly isn’t immune to the difficulties either. Vehicles and auto parts made here are mostly sold to American consumers. And as recent data shows, Canadian consumers are already spooked: retail sales are up 3.9 per cent year over year, down from a pace of six per cent at the end of 2010.

As for what’s bogging down the American auto industry, it’s everything from financial panic in Europe to the debt crisis and high unemployment in the U.S. “There’s a saying that if you have a job, you need a car,” DesRosiers says. “The opposite is also true.”

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