JOHANNESBURG (Reuters) - South Africa's new vehicle sales fell by 25.9 percent year-on-year in July, industry data showed on Tuesday, sapped by weak domestic demand. The automotive industry, one of the biggest in the country's manufacturing sector and a key employer, has been in decline for more than two years, knocked by a domestic recession and a global downturn that has slashed demand for exports. The National Association of Automobile Manufacturers (NAAMSA) said total new sales dropped to 34,503 units last month compared with 46,547 in the same month last year. When stripping out sales from Associated Motor Holdings -- which reports separately -- sales fell 27.4 percent to 30,731 units. The decline was sharper than in June but well off the peak fall of more than 40 percent hit earlier this year, suggesting some improvement. NAAMSA said some segments, such as the commercial vehicle sectors, showed a modest rise on the previous month's sales. But exports plunged again, sliding 60.3 percent in July to 11,220 vehicles. Sales for the year of 224,706 vehicles are running 32.7 percent lower than for the first seven months of 2008. "The trading environment during July, 2009 had remained fundamentally weak with all sectors of the South African automotive industry continuing to experience severe sustainability challenges," NAAMSA said in a statement. "Improvement in the automotive industry's domestic operating environment would depend on a revival in consumer spending on the back of lower interest rates, as well as on stimulatory government expenditure." The central bank has cut its repo lending rate by 450 basis points to 7.5 percent since December, not quite unwinding the 5 percentage points in hikes between June 2006 and June 2008. The rate cuts should support household spending, although debt levels remain high, while tighter lending laws and banks' reluctance to extend too much credit from weak balance sheets may limit any recovery. NAAMSA said concerns continued about whether a hoped-for second half recovery in the domestic economy would come as most indicators pointed to an economy firmly in recession. | 
