Some Thoughts about US Autos and Manufacturing

Currency analysis often focuses on the macro economics and does not delve into sectoral performance. Yet what is happening in the auto sector looks promising and is in fact impacting the macro economic variables. The first clue was actually in Q4 GDP figures. Household purchases of durable goods is very cyclical. This jumped in Q4 and consumption vehicles rose by almost 1/3. Yet goods imports, which includes vehicles fell by 15.5%.

This hinted to us that there may be a shift underway from foreign producers to domestic producers. The January vehicle sales bear out this point as well. The total monthly sales were 12.53 mln units (seasonally adjusted annualized rate) from 11.46 mln in August. Sale by domestic producers rose from 8.66 mln to 9.59 mln.
That is to the say that the increase in US vehicle sales have been nearly solely accounted for by domestic producers. This industry may be playing an important role in US trade improvement, inventory shifts and consumption.

In addition, it may say something about the US manufacturing sector. The US is one of the few countries that have kept unit labor costs (wages, benefits, productivity) in line with the ultra-competitive Germany. Competitive unit labor costs, coupled with a under-valued currency (against most of the major currencies, not EM) and a near chronic threat of protectionism may encourage foreign producers to local production facilities in the US.
Some Thoughts about US Autos and Manufacturing Some Thoughts about US Autos and Manufacturing Reviewed by Marc Chandler on February 02, 2011 Rating: 5
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