American Manufacturing Dips in July as Auto Industry Slows

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The Federal Reserve published its monthly Industrial Production and Capacity Utilization report for the month of July, which showed a dip in American manufacturing, due primarily to a decline in production within the auto industry.

The data identifies that America’s industrial output grew at a slower pace through the month of July, as compared to June. Industrial output saw an increase of 0.2% in July, only half of the increase witnessed in June, when it grew by 0.4%.

Within all industrial segments, the manufacturing segment particularly posted a decline in the month of July. The data reveals that American manufacturing output slid by 0.1% in July, which was primarily because of a decline in the production of motor vehicles and auto parts.

During the month of July alone, the production of motor vehicles and parts, which falls under durable manufacturing, fell by 3.6%. On a year-over-year basis, the production of automobiles and parts plunged by five percent when compared to July 2016.

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The slowdown in the auto industry also hurt the consumer goods segment, where the decline of 3.2% was recorded in the production of automotive products. Compared to the same month in the prior year, the manufacturing of automotive products fell by four percent in July this year.

The declining figures point to an overall slowdown in the American auto industry. Auto sales have slowed since the beginning of this year after having peaked a year ago.

The declining demand has forced the biggest three American automakers—General Motors Company (NYSE:GM), Ford Motor Company (NYSE:F), and Fiat Chrysler Automobiles NV (NYSE:FCAU)—to cut back on production, resulting in thousands of layoffs this year.

The biggest of the “Detroit Three,” General Motors, has been eliminating shifts at a number of its production plants to scale back production in line with slowing demand.

The slowdown, likewise, had a trickle-down effect on auto parts manufacturers and retailers. Earlier this year, America’s biggest auto parts retailer, Advance Auto Parts, Inc. (NYSE:AAP), also announced hundreds of layoffs as it streamlined it operations.

Similar auto parts factories have also been cutting back on production amid sluggish demand and laying off factory workers.

The decline in manufacturing jobs, particularly in the auto industry, is alarming at a time when thousands of low-income-earning Americans are already dealing with mass layoffs in the retail industry.

 

Sources

Industrial Production and Capacity Utilization – Summary,” Board of Governors of the Federal Reserve System, August 17, 2017.

Table 1 Industrial Production: Market and Industry Group Summary,” Board of Governors of the Federal Reserve System, August 17, 2017.

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