Domestic consumer spending, which was critical for the survival and growth of the automotive industry, was likely to start recovering in the second half of this year, Nedbank economist Nicky Weimar said at the Retail Motor Industry (RMI) conference on Wednesday.

However, she noted that vehicle sales would continue to decline steeply for the remainder of this year and that sales would only experience a mild recovery in 2010, as consumer confidence would remain low.

She explained that even if interest rates were lowered, consumers were still very uncertain about the market and would rather save their money than spend it.

The National Association of Automobile Manufacturers of South Africa estimated that some 450 000 new vehicles would be sold in South Africa this year, down from last year’s 533 327 units, 2007’s 676 097 units and a record 714 000 units in 2006.

Further, Weimar stated that the International Monetary Fund’s expectations that the global economy would grow by 0,5% in 2009 was optimistic, saying it would probably be lower.

Consultant and scenario planner Clem Sunter noted during the conference that there was an 80% probability that the world would experience a classic hard-times recession and a 20% probability that it could tip over into a perfect storm or depression.

While it seemed more likely that this would only be a recession and not an even longer period of depression, four key elements could change the situation, he said.

Increased protectionism, with the US and European countries implementing quotas and tariffs against Chinese imports, could change the situation.

Further, any major military confrontation, which would most probably take place between the US against Iran, Afghanistan or Pakistan, could increase the probability of leading to a depression.

The national bankruptcy of any large European economy, such as that of Hungary, Poland or Ireland, which were already under pressure, could add to the probability of leading to a depression,

The meltdown of China’s economy could also make a critical impact on tipping the world into a depression.

Either way, the world was in for a long haul, following a long boom period that had lasted from 1981 to 2007, highlighted Sunter, saying that businesses and economies would have to continue adapting quickly as conditions changed.

However, when the world emerged from the recession, a number of changes would be evident, said Sunter.

Banks, specifically in the US, would be more regulated and there would be no more easy credit.

Further, this would be the end of the US’s dominance in the global economy, with the Eastern economies, such as those of China and India, becoming equal to that of the West.

More emphasis would also be placed on new technologies, specifically energy-related and energy-efficient technologies, commented Sunter.

The RMI conference was held in conjunction with the Automechanika exhibition at Nasrec, in Johannesburg.

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