FRANKFURT (Reuters) -- Western Europe's car market showed signs it was stabilizing last month as stronger demand in Germany and Spain contributed to roughly flat auto sales from a year ago, said auto forecaster JDPower LMC on Thursday.
The UK-based group said consumers bought 1.3 million cars in July, a drop of just 0.1 percent from a year ago. That brings sales for the year so far to 8.9 million, down 2.5 percent.
On a seasonally adjusted basis, July's sales were the second-highest in the year to date, said JDPower. "For the first time since late 2002, when Italian incentives artificially boosted sales, July represented more evidence that a combination of aggressive marketing and gradually returning confidence are bringing an end to the decline in underlying demand which afflicted the early part of this year," said Pete Kelly of JDPower LMC in a statement.
Europe's carmakers have been blighted by falling demand over the last two years, due mainly to weak economic conditions and subdued consumer sentiment. The drop has resulted in fierce pricing competition which in turn has put pressure on profits.
Few of Europe's auto manufacturers expect to lift profits this year and German luxury carmaker BMW, viewed by investors as a safe haven, reported on Thursday a seven percent fall in second-quarter pre-tax profit on flat unit sales.
Most analysts and companies expect a slight improvement in auto sales in the second half of the year.
Kelly said higher sales in Germany and Spain in July coupled with mild improvements in consumer confidence painted a picture of recovery compared with market weakness earlier in the year, albeit at the expense of pricing.
"While difficult to quantify, evidence from a number of markets, including Italy and Germany, suggests that the strength of sales owes a great deal to aggressive marketing and low prices," said JDPower LMC.
Kelly cautioned, however, that there were more worrying trends in Europe's third and fourth biggest markets. Stronger Italian sales might not be sustainable and poor results in France boded ill, he said.
