Tuesday, October 17, 2023

Like retail sales, motor vehicles lead the way in industrial production


 - by New Deal democrat

As with retail sales earlier this morning, motor vehicle production is playing an outsized role in expansion this year.

Industrial production as a whole rose 0.3% in September. But August was revised down by -0.2%, so on net it increased only 0.1%. Similarly, manufacturing production rose 0.4%, but with a -0.3% revision to August, was also only up 0.1%. Here’s what both look like for the past two years, normed to 100 as of production’s most recent prior peak last September:

On a YoY basis, industrial production is only up 0.1%, while manufacturing production is *down* -0.8%:

In the past, this would have almost always have meant recession. But since the China shock in particular, manufacturing in particular is no longer a big enough share of the economy to cause a downturn on its own:

Motor vehicle production has been playing an outsized role in the recent improvement. In September motor vehicle and parts production rose 0.3%. Below I show it normed to 100 as of its 2017-2019 average. Production declined as much as -80% during the months immediately after the pandemic hit, and averaged -14% for all of 2020 and another -8% in 2021 before returning to 100% beginning in April 2022. Only since April of this year has production been significantly higher, noting that it has slightly below its July peak:

On a YoY basis, motor vehicle production is up a very strong 7.0%:

This despite the strike that began late last month.

It may not be that hyperbolic to say that, but for the motor vehicle industry, the economy would be in recession.