US factory output sagged in January as auto sales slump

US manufacturing output dropped sharply in January as motor vehicle production wracked up its worst decline since back in 2009. There were also declines in a broad range of goods. This could stoke fears of a sharp slowing of factory activity.

The US Federal Reserve said on February 15 that manufacturing had dropped 0.9 percent in January. This is the steepest decline in the last 8 months. Adding to a sense of weakness, the data for last December was revised downward indicating a smaller output than first reported. The December figures for industrial production were cut to just a 0.1 percent gain from a 0.3 percent gain. Capacity utilization declined 0.6 percentage point to 78.2% in January, the lowest level since last July.

Total industrial output, including factories, mining operations and utilities, declined 0.6 percent during the month. This was the first drop since May 2018. Despite the decline, production was still 3.8 percent better this January than last year.

Autos and parts output dropped

The production of vehicles and parts declined by 8.8 percent last month. This is the biggest drop since May of 2009 a time when the US was still in deep recession. Production off machinery, chemicals, aerospace equipment and electronics also fell off last month.

The statistics were far off forecasts. Economists polled by Reuters had predicted manufacturing production would rise by 0.1 last month.

Breakdown and causes of decline

Last month all categories except mining and utility production declined. Even excluding the large decline in autos, factory output fell 0.2 percent. Mining output was up a mere 0.1 percent last month but with the cold weather utilities gained 0.4 percent.

The manufacturing sector is facing slower global growth, trade tensions and a strong US dollar. There was also a drop in retail sales over the holidays.

Ian Shepherdson, chief economist at Pantheon Macroeconomics said: “Manufacturing is under real pressure from the slowdown in China and the trade war, and we expect output to drift down over the first half of the year, putting the sector into a mild recession. This won’t kill the rest of the economy, but it won’t look good, either, and until the sector bottoms out in the late spring it will make the Fed’s recent dovish turn look like the right move.”

A much more positive outlook is given on the appended video that stresses the positive job growth lately.

Previously published in Digita Journal

US auto sales rise in June for US big three

(July 3) In June, sales were stronger for top US auto manufacturers. Consumers continued to buy sport utility vehicles and trucks in larger numbers. So far there seems to be no negative reaction to higher fuel prices, interest rates and trade tensions.

Sales rise but investors sell shares in auto firms

Investors were selling off shares in the big three Detroit auto manufacturers, GM, Ford, and Fiat Chrysler during June. This may be caused by rising trade tensions between the US and trading partners and the threat of tit-for-tat tariffs in the auto sector. The tensions have led to a fall in US consumer confidence in June and caused some effect on plans to purchase big ticket items. Some consumers may be buying autos before the price rises due to a trade war.

A poll of economists by Reuters predicted a seasonally adjusted annual rate of 17.0 million vehicles for the U.S. auto industry in June. U.S. vehicle demand in June of 2016 hit a record 17.5 million vehicles .

GM sales are up

The number one US auto manufacturer GM, has stopped reporting its monthly numbers this April but claimed its sales rose 4.6 percent to 758,376 for the quarter that ending in June. The sales increase saw strong truck sales and of new cross-over vehicles.

Kurt McNeil, the vice president of US sales operations said: "Customers are buying with confidence because the economy is strong and they expect it to remain strong.

Ford sales also increased

Ford is the second largest auto manufacturer in the US. The company said it sold 230, 635 vehicles in June compare with 227,979 in 2017. Ford SUV's sold 77,453 vehicles up 8.1 percent and a record for June.

The company said that sales of its popular F-series large pickup trucks were on track to break the previous annual record of 939,511 units set back in 2004. The series is the best-selling model line in the US.

Fiat Chrysler also does well

The company claims that US sales rose 8 percent in June to 202,264 vehicles. The sales spurt was largely driven by Jeep and Ram trucks brands. Jeep sales alone rose a whopping 19 percent while Ram Trucks also posted a 6 percent gain, their best June sales ever. In June of this year the Jeep Cherokee sales rose 89 percent to 22,433 vehicles compared to just 11,895 in June of last year.

Positive signs for auto manufacturers

US jobless rates are at their lowest level since the turn of the century 2000. Average incomes are also beginning to grow more strongly. Nevertheless many analysts are predicting weaker sales for the rest of the year and declining demand next year.

The weaker outlook is caused by rising interest rates on car loans while bankers are tightening terms for car loans according to economist Charlie Chesbrough who argued that autos were becoming less affordable.

GM and other car makers have also warned that if US president Donald Trump imposes steep tariffs on foreign vehicles and imported auto parts this will raise prices to consumers and costs to manufacturers and sales could drop dramatically.

Previously published in Digital Journal

US February auto sales rise significantly

February auto sales in the United States rose at a seasonally adjusted annual rate in February of 17.43 million according to WardsAuto. Autodata put the rate at 17.54 million.

2016 started off in January with sales growing at the fastest pace since 2000. February continues the trend upward — most companies beat expectations with Ford among the the leaders. Of the other big three, GM posted an unexpected decline while Fiat Chrysler did very well. Ford sales grew by a humongous 20.2 percent compared to last year while expected growth was 12.6 percent. GM sales declined by 1.5 percent while sales were expected to grow by 5.1 percent. Fiat Chrysler sales grew by 11.8 percent while expectations were for a growth rate of just 9.2 percent.

Volkswagen sales were still hurting as a result of their diesel emissions scandal. Sales slumped by 13 percent. However, the Tiguan soared in sales by 78 percent. Luxury German maker BMW sales also declined by 12.4 percent. However, Porsche was one bright spot among German auto manufacturers with a sales jump of 11.2 percent.

Among Japanese auto makers Nissan had a sales jump of 10.5 percent much more than the 7.2 percent expected. Toyota had a gain of just 4.1 percent less than the 4.9 percent expected. Honda had a large jump of 12.8 percent compared to expectations of 8.8 percent.

Among Korean auto makers Hyundai had a marginal 1 percent gain in sales while Mazda had a large drop of 16 percent. Kia was the big winner with a sales jump of 13 percent.

Ford's impressive growth was fueled by strong demand for SUV and crossover vehicles whose sales increased by 28 per from last February. However, the popular F-Series pickup trucks also sold well, 10 percent better than a year ago. Cars also did quite well jumping by 19 percent from last year. Fiat Chrysler's sales were bolstered by strong demand for the Jeep SUV and for the Ram truck line.

Several factors may have influenced the increase in sales. Michelle Krebs, an analyst with Autotrader said: "In addition to positive economic factors, February car sales got a boost from the Super Bowl, (the) Presidents Day (holiday) and beefed up dealer advertising." Analysts expect that eventually sales will hit a plateau and taper off, but since the 2008-9 recession sales have been increasing. On the east coast of the US, a January blizzard may have resulted in purchases being delayed until February. Low fuel prices, easy credit, and a high employment level may also help increase demand for new cars. The low fuel prices may be leading to more sales of expensive trucks and SUVs. Edmunds.com reports that light trucks and SUV's outsold cars for thirty months in a row and amount to 60 percent of sales overall in February.