Good News in US Auto Manufacturing

Matt Shelly
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The US auto industry has had its ups and downs. At various times, auto manufacturing has been the load-bearing support for the American industrial economy, while at other times it has limped along on taxpayer-funded life support. Since the slump that set in back in the summer of 2008 and the mammoth GM bankruptcy that followed it, the industry has largely been treading water. There is a bright spot, however, in what has been the very uncertain US auto industry: rising sales. Where this partial recovery in auto manufacturing comes from, and whether it's going to last, is worth looking into.

For the better part of a century, auto manufacturing has been the bellwether of the modern industrial economy. It's often what people think of when they hear the phrase "heavy industry"; as goes the fortune of the auto industry, so go the fortunes of the larger industrial sector of the market. To hear that there's good news in auto manufacturing these days is like hearing that a sick friend is being discharged from the hospital: all may not be quite perfect, but it's a hopeful sign.

The good news, in this case, is even better than expected. While nearly all manufacturing saw an increase in the third quarter of 2013, it was auto manufacturing that led the way with a 5.2-percent rise in auto assemblies. Given that these figures are accompanied by only a modest growth in industrial capacity that's actually being used, the gains seem to be real as opposed to inflationary.

All of this is good news for other industries across the country, even for those that would seem far removed from auto manufacturing. Given the relatively large and well-distributed compensation enjoyed by autoworkers, a rise in auto manufacturing output may spread across to a rise in retail sales by the holiday season, as the more secure workers find larger budgets for the discretionary spending that drives a consumer economy. The effects of this growth on peripheral industries, however, remain to be determined.

One of the problems with reading too much into these numbers is the transitory nature of economic indicators. While the recent rise in auto assemblies is good news and puts auto manufacturing back up to heights it hasn't enjoyed since the summer of 2007, those gains need to be sustained over a period longer than a single quarter. Using one good report to forecast a trend would be irresponsible.

Auto manufacturing is a large, important industry. Any good news from that sector is going to be welcome. While there are important caveats to projecting a full-scale recovery from the third-quarter rise, the numbers so far are looking good for auto manufacturing in the US.

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