By Reuters| Published: Aug 17, 2019 10:51 AMView Photos
US automakers had a tough time in H2 2018 and first 4 months of 2019, but things have improved from April
U.S. motor manufacturing has been a rare bright spot amid a worldwide slowdown in the auto sector and a cooling in the rest of U.S. industry, but there are signs U.S. automakers could now be running into headwinds as well.
U.S. motor vehicle and parts production was up by 3.7% in the three months from May to July compared with the same period a year earlier, according to data from the Federal Reserve.
By contrast, production in the rest of the manufacturing was down by 0.3% in May-July compared with a year ago, the fastest decline since September-November 2016.
U.S. automakers had a tough time in the second half of 2018 and the first four months of 2019, but output, employment and sales all started to pick up from the end of April.
U.S. automakers and dealers successfully pushed through further price rises, extending a trend that started in early 2018.
New vehicle prices were up 0.9% in the three months from March to May compared with a year earlier, the fastest year-on-year increase since September-November 2013.
But price increases have started to run into consumer resistance.
The proportion of consumers saying now is a bad time to buy a new vehicle because prices are high has been creeping up in the University of Michigan's monthly survey of consumers.
New vehicle sales were flat in the three months May-July compared with the same period in 2018, according to the U.S. Bureau of Economic Analysis.
Motor vehicle and parts wholesalers have been left carrying inventories equivalent to 1.77 months of sales at the current rate in June, up from 1.55 months in the same month a year ago.
Auto dealers have been left holding a stock of unsold vehicles from previous model years and are resorting to more aggressive discounting to clear the glut.
The inventory glut reflects a continued cooling of the U.S. auto market, according to the Wall Street Journal ( Dealers dangle deals to move outgoing models , WSJ, Aug. 16).
Sales remain relatively healthy, but auto makers haven't adjusted their production schedules quickly enough to account for slowing demand, leading to a backup of outgoing model-year vehicles.
New vehicle sales prices (including discounts) fell sharply in July, as dealers tried to shift ageing models.
U.S. motor manufacturers will likely have to slow production in the remainder of the year to control inventory and protect pricing.
If growth in auto manufacturing slows or turns negative, it will have a knock-on effect throughout the supply chain and on employment.
And if auto output slows, the faltering economic expansion will become even more dependent on continued growth in the services sector and a recovery in the rest of manufacturing.
(John Kemp is a Reuters market analyst. The views expressed are his own)(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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