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Europe just got a bad omen for the economy in 2019

[MUNICH] European car sales declined for a fifth straight month in January in a worrying show for the continent's economies battling a technical recession in Italy, uncertainty over a snap election in Spain, and the UK coming no closer to a deal on Brexit.

Passenger car registrations dropped 4.6 per cent compared with last year to 1.23 million vehicles in the European Union (EU) and European Free Trade Association, according to the European Automobile Manufacturers Association. Sales declined in all of the region's largest markets of Germany, France, the UK, Italy and Spain.

What started last year with wild sales gyrations around the September introduction of new emissions tests leading to production bottlenecks and pricing pressure has turned into a broader slowdown. Germany, Europe's largest economy, narrowly avoided a contraction at the end of last year with economic jitters since intensifying. At its January meeting, the ECB (European Central Bank) indicated the balance of risks to its forecasts has shifted to the downside.

"The EU auto-demand cycle has peaked," Bloomberg Intelligence analyst Michael Dean said in a note, while the head of Germany's most powerful labour union in Munich predicted employment in the country's car sector would top out in 2019.

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Among the five major European markets, Spain saw the steepest decline in registrations with a drop of 8 per cent, as car demand in Italy slumped 7.5 per cent, according to ACEA. Spain is is headed back to the polls after the budget was rejected.

Carmakers are facing added problems in the event of a no-deal Brexit. Renault SA this week warned it would only be able to meet its forecasts if the UK leaves the EU with a deal. Ford Motor Co said earlier this week a hard Brexit would be "catastrophic" for the country's automotive sector and its own factories.

Audi and Porsche, two Volkswagen AG profit drivers, saw double-digit percentage declines.

Some reprieve might come in the form of an extension of a deadline for higher tariffs by the US on Chinese imports, which the country is considering, people familiar with the matter said Thursday. The tensions have weighed on BMW AG and Daimler AG in particular, which ship American-made SUVs into China.

BLOOMBERG