POSTED BY ANGUS GEDDES
In Spain, the composite PMI for May fell marginally to 57.2 from 57.3 in the previous month but forecasts had been for a decline to 57.2. The service sector PMI fell to 57.3 in May from 57.8 in the previous month. The service sector PMI hit an 18-month high in April, while May still signals a sharp monthly increase in activity. Survey respondents were at their most optimistic on future trading for more than two years.
Markit senior economist Andrew Harker commented “there is little sign of growth running out of steam in the near-term at least. On the contrary, business sentiment picked up to the strongest since March 2015. Should the data remain at similar levels in June we could be set to see a further acceleration in growth of GDP in the second quarter.”
The consumer recovery in Spain has much further to go with the unemployment rate most recently at 17.8%. Stocks we hold such as Bankia and Bolsas y Mercados Espanoles should be well placed to benefit.
Auto Trader is set to get into gear. The UK’s largest online car listing website will report annual financial results on Thursday. This covers the twelve months to March 2017 and will therefore reveal if the June Brexit vote had any impact. Brokers have diverging views on the shares with Barclays recently lifting its target price to 470p from 425p. The bank forecasts that Auto Trader will generate robust growth in average revenue per car retailer going forward. Credit Suisse gave the shares an underperform rating in May and a price target of 360p. The key business drivers are the volume of used car transactions and the performance of new products.
New product areas include part exchange, car financing and the sale of new cars on Auto Trader’s platform. The company’s nearest competitor is Gumtree, which appears to be a much lower quality listing platform. Looking at recent data for UK new car sales and there was an 8.5% decline in May on a year ago. This was driven by a 20% decline in diesel sales with petrol car sales up 0.4% and alternative fuel vehicles (AFV) up by 46.7%.
March was however an all-time record with car buyers looking to get in ahead of tax reforms. Mike Hawes from the Society of Motor Manufacturers and Traders (UK) commented recently on the May new car sales figures “Although demand has fallen, it’s important to remember that the market remains at a very high level and, with a raft of new models packed with the latest low emission and connected technology coming to market this summer, we expect the market to remain strong over the year.” We bought Auto Trader recently for the UK and Global Managed Account Portfolios and the Fat Prophets Global Contrarian Fund (ASX:FPC).