Recovery Update: Automotive Output Increases 10 Percent

A report from the Federal Reserve indicates that automotive output rose 10% in July, pushing industrial production levels up a full percentage point.  Industrial production had fallen due to drops in manufacturing, but it has since expanded and increased its output by over a percent in July.

Manufacturing is the biggest factor when it comes to industrial production output.  This year's hot summer is blamed for manufacturers slowing down, with the demand for electricity at a peak for the year.  Consumer demand and spending have also been low with many state's unemployment levels hitting new levels in July.

Many plants shut down during the summer months, but this year General Motors decided to keep a portion of their plants running.  They've had a surge in SUV manufacturing since January and are pushing to keep up with the current demand after last year's cut backs.

The demand for new vehicles has been steadily on the rise, so many companies are trying to play catch up with fewer workers and less factories up and running.

"Right now, what's going on is everyone is really stretching their plants – and hopefully not to the breaking point," said David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich.  "I don't think they will.  But until manufacturers get more comfortable with the direction of the economy, they won't add capacity."

The auto market is still expected to continue to thrive, although it may hit a few rough patches.  Manufacturers are pushing overtime on the workers through at least Labor Day and some fear that they'll wear out.  However, most are thankful to be working and are enjoying the extra income.  Plus, with the modernization of assembly plants, it's not as hard as it used to be to put out a quality product.  In fact, according to a J.D. Power survey, domestic automakers had fewer flaws in production than imports for the first time in 24 years.

Zhao Hang, director of the China Automotive Technology & Research Center, said "The rising Gross Domestic Product (GDP) growth rate and the increasing purchasing power of consumers will lay a solid foundation for the development of the auto industry.  With the accelerating process of urbanization, the rapid development of the second- and third-tier markets will also drive the growth of the auto market.

Although we've been in a deep depression, American companies are starting to buy manufactured goods to stay afloat.  Exports have been doing better since the American dollar has weakened and attracted more buyers from overseas.  Ocean freight space is slowly becoming more available as the <a rel="nofollow" onclick="javascript:_gaq.push(['_trackPageview', '/outgoing/article_exit_link/3187054']);" href="http://www.shiplilly.com/"title="Ocean Shipping">ocean shipping</a> industry also recovers.  Economists still expect a wavering, unpredictable, and slow recovery, but the manufacturing sector with the automotive industry driving it seems to be on a fairly steady incline.