JOHANNESBURG (Reuters) - South African new vehicle sales fell by 23.4 percent in May as higher interest rates curbed consumer demand, especially for passenger cars, the National Association of Automobile Manufacturers said. NAAMSA has said demand particularly for new passenger cars has weakened substantially in recent months as a result of 450 basis points worth of interest rate increases since June 2006. On Tuesday the association said May new vehicle sales fell by 12,095 to 39,533 compared to the same month last year. Including sales from Associated Motor Holdings, total sales were 43,214 vehicles in May, sharply lower compared to 57,283 last year as higher borrowing costs pinch consumers' pockets. The South Africa Reserve Bank's (SARB) monetary policy committee is widely expected to lift rates again next week. "In light of the tightening environment, we doubt whether we will see any decent recovery in new vehicle sales any time soon, although sales for commercial use may hold up better than the overall number," said Razia Khan, regional head of research for Africa at Standard Chartered Bank. "Still, inflation risks are elevated to say the least, and new vehicle sales have never been a good reason for the SARB not to tighten." NAAMSA also attributed the sharp May decline to public holidays at the start of the month and a wave of violence against foreigners that rocked parts of the country, leaving more than 60 people dead and businesses looted and destroyed. "For the balance of 2008, new vehicle sales generally (are) expected to remain under pressure as a result of the cumulative effect of interest rate increases, inflationary pressures, high levels of debt and the slowdown in economic activity," it said. "Any further tightening in monetary policy risks turning the current sharp downturn in the domestic automotive retail and distribution sectors into a far deeper and prolonged recession with far reaching negative consequences," NAAMSA added. The consequences include downsizing, business closures and job cuts. Analysts have listed unemployment -- currently around 24 percent -- among the factors that have raised political tensions in the country, triggering violence against foreigners accused of taking jobs away from locals. "The monetary authorities should also take account of the current socio-political and economic challenges facing South Africa and the resulting implications in terms of consumer and business sentiment. | 
