Tuesday, October 04, 2011

Auto Sales Bail Out U.S. Economy

Remember that time when a whole bunch of people said we should just let the auto industry fail? Remember that?

Well, who is saving who now? For all those who want to suggest that we don't need manufacturing in America...

Manufacturing grew more quickly in September as production and hiring increased, suggesting that factories would help keep the economy from slipping into a new recession.

Other data on Monday offered more good news for the struggling U.S. recovery, with strong demand for new motor vehicles putting sales on an upward track and construction spending unexpectedly rebounding in August.

"That hardly sounds like an economy flat on its back. The economy is still moving forward. But no one should confuse direction with speed," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

The factory sector has shouldered the broader economic recovery, with September marking a 26th straight month of expansion, and the manufacturing report implied an outright contraction in output would probably be avoided.

That's pretty impressive when manufacturing in both Europe and Asia had "slumped in September to levels not seen since the depths of the financial crisis". Can they pull us under? Apparently not if people keep buying cars.

Soft consumer spending has kept the economy vulnerable, but last month households stepped up their spending on autos.

Initial sales reports from General Motors, Chrysler, Volkswagen, Nissan Motor Co and Ford put industry wide sales on track to near 13 million vehicles on an annualized basis in September.

That would be the strongest pace since April and an increase of roughly 10 percent from a year ago.

And what is propping up construction?

A separate report from the Commerce Department showed construction spending rose 1.4 percent in August as outlays on state and local government building projects rose sharply.

Economists, who had expected a decline, said it implied a somewhat stronger pace of third-quarter growth than they had been anticipating.

Government buildings. How very interesting.

So let's add it up.

Those who wanted to let the domestic auto industry go under a few years ago - wrong.
Those who suggest we don't need manufacturing in America - wrong.
Those who hate to see any kind of government spending as an economic stimulus - wrong.

If we had listened to those people, we would probably be back in recession already.

Just a little something to keep in mind as we go forward and have to listen to these arguments over and over again.