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Auto industry rebounding, sales to return to near record highs in Canada: report

OTTAWA - Canadian and North American car sales will hit new post-recession peaks this year, predicts a new Scotiabank report, in another indication the hard-hit auto industry is recovering after being on the verge of collapse four years ago.

Scotiabank's latest global auto report predicts vehicle sales in Canada will increase to 1.69 million units in 2013 — just shy of the 1.7 million record set in 2002 — following a strong six per cent pick up in 2012.

Meanwhile, U.S. sales are starting to rebound strongly from the slump of 2009, and will hit 15 million this year. That is still below the pre-recession highs of about 17 million, but the best since the slump.

The outlook is especially rosy for Ontario's automotive industry, which is home to American and Japanese-owned auto assembly plants and their suppliers. Together, they build cars, minivans and other vehicles for the Canadian and U.S. markets.

"This is a good story for car dealers and it's a good story for the producers, and all the parts companies in Ontario," said economist Carlos Gomes, author of the report.

"The key driver for the auto market is what's happening in the labour market and if you have employment gains of one-to-1.5 per cent, it is associated with a strengthening auto market," Gomes said.

"And in the United States, they (also) have significantly more replacement demand because the average age of the fleet is now at 11 years and it used to be well below nine."

Despite generally slow growth last year, Canada's economy pumped out an above-consensus expectation of 312,00 jobs, all full-time, in the 12 months to December 2012, or a 1.8 per cent gain.

In the House, junior finance minister Ted Menzies welcomed the report, saying "more auto sales means more jobs for Canadians all across this country," as well as Ontario, where the auto sector is concentrated.

This year, Canadian vehicle sales are expected to be strongest in the resource-extracting provinces of Alberta, Saskatchewan and Newfoundland and Labrador — based on prospects that commodity prices and demand will improve with stronger economic fundamentals in the United States and China.

Gomes said Saskatchewan and Newfoundland are believed to have set new records for car sales in 2012, and will break those highs in 2013. Alberta's sales volume is expected to fall just shy of the 249,000 record in 2007.

The rest of the country will see a modest increase, the auto report predicts, but will still fall about six per cent below peak levels.

For North America including Mexico, sales are expected to hit 17.72 million this year, 2.5 million less than in 2011 — the last year for which there is recorded data — but also more than two million from the 2005 peak of 19.7 million.

For the world as a whole, Gomes says sales will grow in all regions this year compared with 2012, except in recession-plagued western Europe.


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