by Don Lee
American manufacturing activity turned up in July, the government said today, as the "cash for clunkers" car-rebate program helped spark a rebound in the hard-hit industrial sector.
The Federal Reserve reported that industrial production rose 0.5% last month from June, and said that apart from a hurricane-related gain in October, the July reading marks the first monthly increase since December 2007, when the recession officially began.
But the latest encouraging news on the economy was drenched by a separate survey today suggesting that U.S. consumers are unconvinced that the great recession is ending.
A measure of consumer sentiment by the University of Michigan dropped in August to its lowest level since March, with people's assessments of current conditions and future expectations both falling.
Consumer spending accounts for about 70% of American economic output, but the severe recession has turned many people from spenders to savers, raising questions about who or what will drive and sustain a recovery.
Earlier this week, the Fed said that while the economy was stabilizing, household spending continued to be constrained by persistent job losses, tight credit, lower housing wealth and sluggish income growth.
To help consumers and the broader economy, the central bank this week maintained its pledge to keep its benchmark short-term interest rates at near zero for an extended period, noting that it expects weak economic activity and low inflation for some time.
A separate report today by the Bureau of Labor Statistics said that consumer prices in July were unchanged from June and down 2.1% from a year earlier, the sharpest decline since 1950.
While consumers show little inclination to spend beyond necessary goods, they have been flocking to car dealers to take advantage of the government's incentives for trading in their gas-guzzling vehicles for more fuel-efficient ones.
That program, along with a pick-up in the tottering operations at General Motors and Chrysler, accounted for most of the industrial production increase last month.
Still, the Fed report today showed that 12 out of 19 industries increased production over the month, double the number in June and the most since November 2007, said David Huether, chief economist at the National Assn. of Manufacturers.
"It's an encouraging sign," he said.
This week's report that Europe, led by Germany and France, was beginning to climb out of recession may also help American manufacturing, which exports about one-fourth of its produced goods.
The Fed report said the utilization of industrial capacity also rose in July to 68.5% from 68.1% during the prior month. That was also the first upturn since last fall.
By historical measures, however, factories still have a lot of unused capacity to fill before managers may feel the need to add equipment and machinery.
In July 2008, the Fed report said, industries were utilizing 78.6% of their production capabilities, and the average of the past 36 years is 80.9%.
Comments
I love the way Wingnuts have tried to pass off 'cash for clunkers' as a failure, shows how delusional todays right-wing lunatic fringer is.
The economy is recovering and the automovie sector is slowly coming back (thank you Pres Obama and Dems).
I wonder what the GOPer's are going to be fake outraged about next?
Posted by: Purple Floyd | August 14, 2009 12:32 PM
'Cash for Clunkers' is so successful, and so 'Main Street' that it has paid big dividends all the way around -- stimulus on the economy, helpful to ordinary people, helpful to small business (car dealers, etc.), helpful to big business (auto mfrs.), helpful to the environment, and a real 'feel good' program for the country.
And to think, the Obama Administration is accomplishing all of this with a tiny $3 billion! Pin the GOPers tail to the wall on this one, people.
Posted by: K | August 14, 2009 1:11 PM
Yeah - my money paying for someone else's car - makes a lot of sense. Say I need a new stove and fridge.. can I get some of your money? NOT!
Posted by: BigbadSouthsideJim | August 14, 2009 1:43 PM
Posted by: BigbadSouthsideJim | August 14, 2009 1:43 PM
Did you return you $600 rebate from Bush? This is a similar rebate plan except the money doesn't go to the buyer.
Posted by: taxpayer, not teabagger | August 14, 2009 2:32 PM
To Taxpayer, loves to be teabagged:
that 600.00 was for each and every person who pays taxes. This was from their own tax money you fool. Plus at the end of the year when you filed your 2008 tax returns you had to pay a tax on this $600.00.
Posted by: Seville J | August 14, 2009 3:35 PM
~"But the latest encouraging news on the economy was drenched by a separate survey today suggesting that U.S. consumers are unconvinced that the great recession is ending."~
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That's because the people are smarter than the so called experts.
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Their collective wisdom is based on the innate perception that this country is heading in the wrong direction due to programs that are based on borrowing money and increasing the debt load. This short term gain is going to equal long term pain - unless of course the intent is to go bankrupt because there is no conceivable way for America to pay this debt when we have been unable to pay a lesser amount during boom years.
.
What's really sad about it though, is that there exist people who are willing to overlook this fact, slap on a feedbag, stick their heads in the government trough and belch up another little bubble to burst in a short while - all at someones elses
expense.
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It's an economic Katrina folks and it's going to get worse despite what you hear. In fact it's already worse than what you are hearing. And just as in that storm, if you're counting on the government to help you, then your not benefiting from the same kind of wisdom that some of your fellow Americans possess.
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And that too, is a shame.
Posted by: rob | August 14, 2009 6:35 PM
It's not the great success you loons think it was. Many of those 200,000+ car sales were deferred until this took effect. In other words, many of these people would have bought carse w/o the program, but knew the program was coming and deferred their purchase.
http://www.autoobserver.com/2009/08/more-money-for-cash-for-clunkers-not-so-fast.html
http://senseofevents.blogspot.com/2009/08/4500-for-everybody.html
More bad economic news:
http://finance.yahoo.com/news/Stocks-drop-as-investors-apf-1129554766.html?x=0
Better start having cash for torn pants, cash for stained rugs, cash for ....
Posted by: Terry | August 14, 2009 7:49 PM
"Cash for Clunkers" is another government mess, albeit, by Obama terms, a relatively inexpensive mess. What Obama's increasingly silly Swamp propagandists don't mention:
1) the program will cost three times what Obama estimated, thereby calling into question the accuracy of any Obama administration cost estimates. Or perhaps laying down a rule: whenever Obama says a program will cost X, the true cost will be three times what he says.
2) the sounds of government computers crashing shows that the government can't administer even this small program.
3) the latest economic figures show the CFC didn't increase car sales in the long run--it merely induced consumers to either hold off, or accelerate, cars they were already going to sell. In fact, the latest figures show that overall retail sales FELL in June, while first time claims for unemployment INCREASED.
I could go on.....
Posted by: Community Organizer | August 14, 2009 10:25 PM
Hmmm, retail sales were down in July, unemployment claims went up and the Obimbobots believe the economy is cured.
I will say that the Cash for Clunkers was more stimulative than the so-called stimuls package last February. But even before the Cash for Clunkers, the auto companies were offering incredible incentives anyway.
Let's get this straight though. The Cash for Clunkers wasn't implemented until the end of July, right? Somehow I don't think that program had much to with increased manufacturing because it occurred the end of the month AND these dealers have had such an inventory for many months now, that new cars wouldn't need to be made en masse yet.
Posted by: John D | August 14, 2009 10:56 PM
It will be interesting to see how many default on their car loans in 6 months. It should also be noted that this is just going to create a temporary spike. This will not yield long-term growth. Even with this program, auto makers are only using 40% of their manufacturing capacity.
Posted by: FLZapped | August 15, 2009 6:34 AM
Uh-oh, them darn Democrats did it again !! They did something right and here we had our fingers and toes crossed, hoping they would fall flat on their " socialist " faces !! Get used to it, boys and girls, of the Republican/Libertarian Party, there will be more successes from the Democratic Party. There could be much more success if we could get the disloyal opposition to cooperate, just a bit more. I don't think they want too many successes, because that would mean that America would be on the road to recovery and that would spell disaster for that Grand Old Party. Maybe they will see the light and join President Obama in his fight for a more just, fair and efficient healthcare system. Then, all of America would appreciate that Grand Old Party, a whole lot more !!
SUPPORT OUR TROOPS, BRING THEM HOME, ALIVE AND WHOLE. NOW.
Posted by: Don Fitzgerald, IL | August 15, 2009 8:56 AM
"John D," you're absolutely correct. I'd add:
1) Car dealers are livid that the Clunkers Program hasn't yet reimbursed them. As the Detroit News reports, the law promised they'd be reimbursed within 10 days, however the bureaucracy (with usual Obamaland incompetence) can't go through the applications fast enough.
2) The new cars being bought are often foreign cars, BMWs and Cadillacs. Hardly a boon to American workers.
3) As the New York Times has pointed out, the cost of the program per ton of carbon emissions saved is astronomical. Even assuming carbon-emission reductions are worth pursuing, it is in fact the least cost-efficient means possible to reduce carbon emissions.
Economic nonsense. Incompetently administered. At three times the forecasted cost.
Posted by: Community Organizer | August 15, 2009 9:53 AM
Wonder who is getting the better shake out of the clunkers the Overseas manufactories or the American?
Posted by: Inky | August 15, 2009 10:07 AM
Attn;Purple Floyd, I suggest you try and contact some of the car dealers that have taken in more than 90 cars, and have only received payment for three or four cars from the NOBAMA administration. Then we will see who the real wingnuts are. Keep drinking the cool aide, maybe try adding some
sugar.
Posted by: Paul | August 15, 2009 4:42 PM
You failed to mention all the "unintended consequences" of cash clunkers. Those being that it is hurting used car sales, auto repair shops, auto parts stores, charity car donation and the poor.
Posted by: Cars4Charities | August 19, 2009 11:31 AM
I know this is all and old blog, but I thought I would add an update. As of 12/20/09 there are over 20 CFC trade ins sitting in the back of a K-mart parking lot here in the town I live in. The dealer has them stored there until the feds pay them the money they promised during the CFC program. Each has "CFC" painted on the wind shield and that is why I stopped and ask the dealership what was going on.
Posted by: John Luke | December 31, 2009 2:46 PM