07:03 AM EDT, 10/09/2024 (MT Newswires) -- Canadian auto sales fell 1.3% month-over-month to 1.72 million units at a seasonally adjusted annualized rate (SAAR) in September, declining in four of the last five months according to Wards Automotive, noted Scotiabank.

While light vehicle sales through the first nine months of the year are up 7.1% year-to-date (YTD), momentum continues to slow in the second half of the year, said the bank.

Q3 sales in seasonally adjusted terms averaged 1.74 million SAAR units, down 2.0% from Q2. Meanwhile, Q3 non-seasonally adjusted sales were up 2% compared with the same quarter a year ago, however, sales in September were down 2.7% year over year -- contracting in year-over-year terms for the first time since December 2022.

As the tightening effect from previous interest rate hikes continued to weigh on household consumption of goods into the summer, so too has it weighed on demand for automotives and new vehicle sales.

Annual headline inflation fell to 2% year over year in August, the mid-point of the Bank of Canada's 1% to 3% target range, reinforcing calls for further cuts to the policy rate which has been lowered to 4.25% as of September from the recent peak of 5% at the beginning of June, stated Scotiabank.

Should inflation sustainably remain below the 3% upper threshold, the bank expects more cuts to the policy rate at the two remaining BoC policy rate meetings in 2024 and into mid-2025.

It remains to be seen how quickly easing in monetary policy conditions will reduce affordability constraints and pass through to vehicle sales, added Scotibank.

The bank's outlook for Canadian new light vehicle sales is 1.78 million this year and 1.8 million in 2025 as interest rate headwinds ease.