Auto Makers Rev Up Manufacturing Output, Summers Bows Out
- Industrial Production for August increased by 0.4 percent, as auto production rebounds.
- The Producer Price Index for August was up 0.3 percent, as energy and food prices increased.
- The core PPI was unchanged in August as motor vehicle prices dropped.
- Retail Sales for August gained a modest 0.2 percent despite strong unit auto sales.
Economic data for August are consistent with moderate GDP growth in the third quarter. Industrial production increased by 0.4 percent for the month, the strongest monthly gain since last February. Motor vehicle production drove the August IP numbers. Seasonal adjustment factors make auto-related production subject to interpretation in the summer. This summer it looks like auto makers eased more than usual in July, but made up for it in August. Strong auto sales, at a 16.1 million unit annual rate in August, are justifying stronger assemblies. Auto and light truck assemblies increased by 11 percent in August after seasonal adjustment. The production index for motor vehicles and parts was up 5.2 percent for the month. The total manufacturing index increased by 0.7 percent after decreasing by 0.4 in July. Utilities were a drag on industrial production in August, with output down 1.5 percent. August had the fifth consecutive decline in utility output after electricity production surged last March.
Retail sales for August were up just 0.2 percent, despite strong unit auto sales. Topline auto and parts sales gained 1.0 percent. Excluding autos, retail and food services sales for August were up a scant 0.1 percent. Drags came from building materials, down 0.9 percent, clothing stores, down 0.8 percent, and sporting goods stores, down 0.5 percent. Modest retail sales growth over July and August suggest only moderate gains in personal consumption expenditures for the quarter. In short, for the current third quarter it looks like the consumer is keeping pace with, but not leading, the overall economy. Producer prices for finished goods gained 0.3 percent in August, pushed by energy prices. The energy price index for finished goods gained 0.8 percent as gasoline prices increased 2.6 percent at the wholesale level. Over the previous 12 months the finished goods PPI is up a sedate 1.4 percent.
Larry Summers has withdrawn his name from consideration for the next chairman of the Federal Open Market Committee. President Obama’s short list also includes current Fed governor Janet Yellen and former governor Don Kohn. The Obama administration appears to be hesitant to support Yellen, so it should come as no surprise to see additional names floated, including Stanley Fischer and Roger Ferguson.
Market Reaction: Equity markets opened with gains on the expectation that any other likely candidate to replace Ben Bernanke at the Fed would dial down QE3 more slowly than Larry Summers. Treasury yields are down. Oil is down to $107.12/barrel. The dollar is up against the yen and down versus the euro.
For a PDF version of this Comerica Economic Alert, click here: Industrial Production 091613.