Auto Manufacturing Slips in August, But Decline may be Short-Lived
Output at factories, mines and utilities fell 0.1% after a 0.2% gain the prior month that was smaller than previously reported, figures from the Federal Reserve showed Sept. 15. The median forecast in a Bloomberg survey of 79 economists called for a 0.3% rise.
Automakers scaled back after the biggest surge in almost five years.
The output of motor vehicles and parts decreased 7.6%, the biggest drop since May 2009. That was a payback from a 9.3% surge in July that was the largest since September 2009. It may reflect difficulty in seasonally adjusting the data as fewer plants closed for new model-year retooling in July.
Excluding autos and parts, factory production increased 0.1% in August for a second month.
Industry data show vehicle sales will keep powering production in coming months. Sales of cars and light trucks rose to a 17.5 million annualized rate in August, the highest since January 2006, from a 16.4 million pace a month earlier, according to data from Wards Automotive Group.
The story is mostly one of a big jump in auto production in July, which was reversed in August, so we should look at the two months together, said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York and the only economist surveyed to correctly forecast the drop in factory output. When you do that, you have modest growth in manufacturing. Demand is fairly well-balanced between consumer spending and business investment.
Faster wage gains are needed, alongside improving payrolls and confidence, to trigger a more broad-based pickup in consumer spending thatll bolster more manufacturers. At the same time, recent data including the strongest auto sales in eight years and improving business investment signal the slowdown probably will be short-lived.
The industry appears to be very strong at this stage in the recovery, Erich Merkle, Ford Motor Co.s sales analyst, said on a Sept. 3 sales call. The long-term outlook remains favorable.
Dearborn, Michigan-based Ford in August began building the sixth generation of its 50-year-old Mustang sports car at a Flat Rock, Michigan, factory that will export it to more than 120 countries.
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