2014 has proved a positive year for new vehicle sales within Estonia. Over the first nine months of the year, passenger car (PC) sales were up by 5% year-on-year (y-o-y), at 15,874 units, according to figures from Estonia's association of car dealers and service companies (AMTEL). September's monthly performance was highly impressive, up 19% y-o-y, at 1,841 units for the month.
On the commercial vehicle side, 8M14 figures from the European Auto Manufacturers Association (ACEA) show a total of 1,884 light commercial vehicles (LCVs) sold in country, with a further 508 medium and heavy commercial vehicles sold, plus a further 79 buses, for a total of 2,471 units sold year-to-date.
Adding the 2,471 CV units to the 14,033 PCs sold over 8M14 makes for a total new vehicle market of 16,504 units. On current sales trends, this leaves the Estonian new vehicle sales market on target to hit BMI's forecast of 25,471 units for the full year.
Looking forward, BMI's Country Risk team believes that Estonia's economy has now turned the corner and will post relatively strong real GDP growth over the next two years. Robust private consumption growth resulted in real GDP growth reaching 2.4% y-o-y in Q214, while the reading for Q114 was revised up substantially, from -1.9% to 0.4%% y-o-y due to an alteration to the statistical agency's methodology. Consequently, in September, we revised up our 2014 real GDP growth forecast from 0.9%, to 1.8%.
Turning to private consumption, a key indicator of the potential demand for new vehicles within Estonia, we hold to our view that household spending will remain the primary driver of Estonian real GDP growth over the course of 2015 and into 2016. Strong private consumption in 2014 has been driven by nominal wage growth (declining but still positive) as well as consumer price deflation (-0.2% y-o-y in August), both of which have contributed to improving households' purchasing power. This will see household spending contribute 1.9 and 1.8...