OREANDA-NEWS. Fitch Ratings says in a new report that European auto ABS demonstrated healthy performance in 2Q16 as arrears fell following a slight uptick in 1Q16. The Fitch 30+ Delinquency Index and the Fitch 60+ Delinquency Index fell to 0.66% and 0.31%, respectively, from 0.73% and 0.35% in 1Q16. The Fitch Annualised Loss Index also improved to 0.14% from 0.18% over the same period.

UK economic trends remained positive in the run-up to the EU referendum in June. However, business and consumer confidence have since dropped significantly. Despite uncertainty over the conditions of Brexit, the performance of outstanding auto ABS transactions will continue to benefit from comparably high asset amortisation rates.

Fitch's latest forecasts do not foresee an outright recession in the UK despite the negative post-referendum indicators, but the agency now expects GDP growth to slow to 0.9% in 2017 and 2018. These are downward revisions of 1.1pp in both years compared with Fitch's forecast in May. The weaker investment outlook is partially offset by better prospects for net trade, the latter supported by a much weaker pound and falling imports.

New car registration figures continued to grow across all major EU economies in 1H16. Used car prices in the EU also increased 0.5% on the latest quarter on an aggregate basis.

EU-wide new passenger vehicle sales grew 9.4% in 1H16 compared with the same period in 2015. However, following the EU-referendum result in June, Fitch expects a decline in UK new vehicle sales in the coming months due to slower economic growth and weaker consumer confidence, which are usually closely correlated with auto sales.

Total auto ABS issuance volumes, which include retained transactions, increased a significant 37% yoy in 2Q16. In terms of number of transactions, new issuance also rose to 19 from 16 over the same period, including tap issuance from French and German Master Trusts.