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EU car sales retain their patchy recovery for ninth month in row

PARIS--European new car registrations rose for their ninth consecutive month in May, trade data showed Tuesday, although sales remained muted and patchy as the market struggled to shake off a recent slump.

Sales of new cars in the European Union rose 4.5 percent to 1.09 million, according to data from the Association of European Automobile Manufacturers (ACEA).

The figures added to signs Europe's car market is recovering from a crippling six-year downturn sparked by the financial crisis and the eurozone debt crunch.

But in absolute terms the gains were still weak and varied between regions, backing up other economic data showing only a timid return to growth in the recession-hit bloc.

ACEA said it was the second-lowest result for May since the Brussels-based group started releasing the data over a decade ago.

Jean-Francois Belorgey, a partner at EY, predicted overall growth of only 4-5 percent this year as cautious consumers hold back from sales amid the uncertain economic outlook.

“Growth in the eurozone is still very weak, it is highly leveraged and has a high number of unemployed,” he said.

“It will still take a while to return to pre-crisis levels” in Europe's car market, he added.

Nearly 16 million vehicles were sold in Europe during 2007, but only 11.8 million last year.

The European automobile market shrank sharply as the impact of the global financial crisis and the eurozone debt crisis began to bite.

Car sales are an important indicator of business and household confidence, which in Europe remains muted.

This month the European Central Bank unveiled a set of unprecedented measures to bolster growth and prevent deflation, including taking a key interest rate into negative territory for the first time.

Government subsidies helped Europe's car industry weather the worst of the storm but as they have been wound down, several manufacturers again faced tough conditions.

'It can still plunge'

PSA Peugeot Citroen was badly hit by the downturn, and in the last two years has had to close some production capacity and was effectively rescued with French state guarantees.

The French government and Chinese state-owned Dongfeng auto maker have entered the company as shareholders.

French automakers benefited in particular from the rise in sales in May, with Renault posting a 18.8 percent gain and a 4.3 percent rise for Peugeot.

German brands, which managed to weather the crisis well thanks to their international reach, also posted steady growth during the month, with Audi rising 5 percent, Mercedes 5.9 percent and BMW 1.5 percent.

Overall Germany's car market, one of the most crucial sectors of Europe's top economy, grew 5.2 percent compared to a year earlier, the data showed.

Sales in Spain also shot up 16.9 percent, thanks to government incentives to encourage buyers, while in Britain they grew 7.7 percent.

But sales in France were an anaemic 0.1 percent increase, reflecting ongoing problems in Europe's second-largest economy as it struggles to stimulate growth and rein in record unemployment.

In Italy, new registrations fell for the first time in five months, dropping by 3.8 percent, hurting sales of local brand Fiat.

“In terms of pure volumes, by any standard, sales in Europe remain low, very low,” said Carlos da Silva at the IHS Automotive Institute.

“The market is on the right track but that does not mean it can't suddenly plunge.”

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