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 Ward’s 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 that’ll 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.
