British car sales post best first half of year since 2005

LONDON Fri Jul 4, 2014 10:18am BST

Cars are displayed outside a Volvo showroom in west London October 4, 2013. REUTERS/Luke MacGregor

Cars are displayed outside a Volvo showroom in west London October 4, 2013.

Credit: Reuters/Luke MacGregor

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LONDON (Reuters) - British new car sales recorded their best first half to a year since 2005, figures showed on Friday, but sales growth slowed in June as consumer demand started to level off.

The Society of Motor Manufacturers and Traders (SMMT) said new car registrations totalled 228,291 last month, up 6.2 percent on a year earlier.

In the first six months of 2014, registrations were nearly 1.3 million, a 10.6 percent rise on the same period in 2013.

"The overall market has risen faster than we were expecting but, after a bumper March, growth is showing signs of stabilising around our forecast level," said Mike Hawes, SMMT chief executive.

Analysts say record low interest rates and a recovering economy has given consumers the confidence to buy more big ticket items.

But sluggish wage growth could be a challenge, in particular if interest rates begin to rise. The Bank of England has indicated this could happen as soon as this year.

"One concern for car manufacturers is that current muted earnings growth threatens to be a constraint for car sales," Howard Archer, chief UK economist at IHS Global Insight said.

Sales slowed from an annual increase of 7.7 percent in May and 8.2 percent in April, and Barclays - which provides finance to car buyers and dealers - said it had seen anecdotal evidence that this trend would continue.

Still, the SMMT said the market was on track for 2.4 million new car registrations in 2014, up more than 6 percent on last year.

Ford's Fiesta supermini and General Motors' rival Vauxhall Corsa were the two best-selling cars in June, followed by Ford's mid-sized Focus and the Volkswagen Golf.

(Reporting by Ana Nicolaci da Costa, editing by John Stonestreet)

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