The annualised rate of sales in Western Europe dropped to 13.6m units last month, says forecaster Pete Kelly of J.D. Power-LMC.

The year-on-year drop was only 0.5%, however, because while "The (January) result looks bad (it) must be seen in the context of the very strong December total: January suffered from payback for robust sales in the previous month so, going forward, there is no need to panic," said Kelly.

Weak demand was most evident in France, Germany and Italy, but the month-on-month drop in Italy was largely attributable to the strong effect of incentives in December. “Two very strong Decembers in the last two years, which were each followed by two weak January results could be a sign that this adjustment process is continuing. A combination of changing seasonality and incentives means that perhaps we should not be unduly worried that the UK market is about to fall sharply and, though we do not expect a repeat of the strong sales in 2003, 2004 should still be a good year by historical standards.”