uploads///

Will Improved Industrial Production Support the US Auto Industry?

By

Updated

US industrial production in July

According to the Federal Reserve’s latest release on August 16, 2016, the US (SPY) industrial production index rose by 0.7% to 104.9 in July 2016, compared to a rise of 0.4% in June.

Note that the industrial production index is a leading indicator of a country’s economy. A rise in industrial production is a good sign for an economy.

Article continues below advertisement

Improved production of motor vehicles

In July 2016, manufacturing output, as reflected in the industrial production index, rose to 103.6 compared to 103.1 in June. Among other factors, improvements in motor vehicles and parts production were reported.

While the overall index rose by 0.5%, the manufacturing of durables such as motor vehicles and parts, wood products, and miscellaneous goods rose by more than 1% in July.

What does this suggest for the auto industry?

Motor vehicle and parts manufacturing are some of the key components of the industrial production index. Therefore, a rise in industrial production also indicates robust production growth in the auto industry, which could be driven by factors such as high demand and flourishing economic growth.

Recent industrial production figures showcase optimism and reflect a sharp recovery from the low of 87.4 posted during the economic crisis of 2008–2009.

In terms of production, General Motors (GM) and Ford Motor Company (F) are currently the top two automakers in the United States. Italian-American automaker Fiat Chrysler (FCAU) and Japanese giant Toyota (TM) also contribute significantly to total US motor vehicle production.

Continue to the next article to read about how the US job market can be used as an indicator for the auto industry.

Advertisement

More From Market Realist