"The small increase in industrial production in August does not change the picture that the factory sector has been broadly stagnant over the past twelve months, and the outlook remains similarly subdued, even before the United Auto Workers strike began last night," according to Michael Pearce, lead U.S. economist at Oxford Economics.
He notes that the "0.1% rise in manufacturing output was held back by a 5% drop back in motor vehicle output, which reversed a similar-sized surge a month earlier. Utilities output rose more modestly as weather patterns were closer to seasonal norms, while mining output was boosted by a 3% rise in oil and gas output. Higher energy prices should spur further recovery in mining output over the rest of the year."
With regard to the effect that the UAW strike will have on the economy he predicts that if a total walkout were to occur, it would reduce motor vehicle output by over 30%, which will begin to show up in the September report. "Another key risk is that disruption reverses the improvement in auto supply chains and puts renewed upward pressure on vehicle prices," he notes.
Overall he sees gloomier times ahead. "The strong dollar, subdued global demand and continued rotation away from goods spending to services mean the outlook for production more broadly over the next six to twelve months remains downbeat.
