TORONTO—Scotiabank says recent price increases for new cars and light trucks will probably drag on Canadian vehicle sales this year.

The bank released a report Tuesday saying it expects 1.94 million passenger vehicles will be sold in Canada in 2017, down from the 1.95 million sold the year before.

Carlos Gomes, a Scotiabank economist, says affordability will factor into sales this year, since the average price in the second half of last year was up 5 to 6 per cent over comparable months, outpacing household income growth.

That follows a period of price increases in the 2-to-3-per-cent range, which was below growth in household incomes.

Gomes says the average sales price for cars and light trucks, according to Statistics Canada’s most recent data, was about $38,800 in November — up more than 6 per cent from a year earlier.

But Gomes says the industry will be helped by an improved economic backdrop, with 2017 Canadian GDP expected to grow about 2 per cent this year compared with an estimated 1.4-per-cent growth in 2016.

Scotiabank’s report says higher vehicle sales in Alberta and Saskatchewan this year will likely be offset by declines in Ontario, Quebec and Atlantic Canada. Volumes in British Columbia and Manitoba are expected to be flat.

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