Tuesday, May 29, 2012

Chicago Fed: Midwest Manufacturing Is Booming; Midwest April Auto Production Soars to 2007 Level

The ChicagoFederal Reserve reported today that its Midwest Manufacturing Index increased 2.4% in April compared to March, following a revised 0.22% monthly decline in March. The April increase was the largest monthly gain in Midwest manufacturing activity since September 2003, more than 8 years ago, and brought the index to the highest level since June 2008, almost four years ago.   

Here are some highlights of manufacturing activity in the 7th Federal Reserve district that covers Illinois, Indiana, Iowa, Michigan, and Wisconsin:

1. Manufacturing output in the Midwest region rose 12% from a year earlier in April, more than twice the 5.8% increase in national manufacturing output over the same period (see chart).  In comparison, the overall U.S. economy (real GDP) grew by only 2.1% in the period from Q1 2011 to Q2 2012. 
         
2. Regional machinery output in April gained 11.5% from its year-earlier level, compared to a 6.6% increase in machinery output at the national level. 

3. Regional steel output improved 10.7% from its April 2011 level, compared to a 7.6% increase in national steel output over that period.

4. The Midwest’s automotive output increased by a whopping 28.2% in April from its year-ago level, compared to a 16.4% gain in national automotive output.  The index level of 99.6 for Midwest auto sector production in April was at the highest level since November 2007, indicating that the auto industry in the Midwest has now made a complete recovery from the effects of the Great Recession.  

MP: Midwest manufacturing output growth continues to lead national manufacturing output growth, which continues to lead overall economic growth measured by real GDP.  The lastest Chicago Fed report suggests that U.S. manufacturing, especially in the Midwest, remains at the forefront of the economic recovery measured by growth rates in output.  In another milestone for manufacturing, Midwest automotive production in April returned to its pre-recession 2007 level for the first time since the recession started in December 2007.    

9 Comments:

At 5/29/2012 9:20 AM, Blogger bart said...

A fuller picture of manufacturing employment (MANEMP):


http://www.nowandfutures.com/images/manufacturing1.png

 
At 5/29/2012 9:49 AM, Blogger Andrew Guenthner said...

Some of the jump in year-over-year numbers may be due to a weak April 2011, which was shortly after the Japanese earthquake. Similar effects may be with us for a few.months. Nonetheless auto production hitting pre-recession levels is a good milestone.

 
At 5/29/2012 9:53 AM, Blogger VangelV said...

Some of the jump in year-over-year numbers may be due to a weak April 2011, which was shortly after the Japanese earthquake. Similar effects may be with us for a few.months. Nonetheless auto production hitting pre-recession levels is a good milestone.

Why is GM pushing product to dealers in such high volumes? If the Chinese are worried about 45 days of sales in inventory why aren't we in terror of more than 85 days?

 
At 5/31/2012 10:38 AM, Blogger morganovich said...

Chicago PMI: The overall index declined to 52.7 in May, down from 56.2 in April. This was below consensus expectations of 56.1 and indicates slower growth in May. Note: any number above 50 shows expansion. From the Chicago ISM:

The Chicago Purchasing Managers reported the May Chicago Business Barometer decreased for a third consecutive month to its lowest level since September 2009. The short term trend of the Chicago Business Barometer, and all seven Business Activity indexes, declined in May. Among the Business Activity measures, only the Supplier Delivery index expanded faster while Order Backlogs and Inventories contracted.

there seems to be a great deal of very contradictory data out there.

 
At 5/31/2012 10:47 AM, Blogger VangelV said...

The Chicago Purchasing Managers reported the May Chicago Business Barometer decreased for a third consecutive month to its lowest level since September 2009. The short term trend of the Chicago Business Barometer, and all seven Business Activity indexes, declined in May. Among the Business Activity measures, only the Supplier Delivery index expanded faster while Order Backlogs and Inventories contracted.

there seems to be a great deal of very contradictory data out there.


From what I see the economy is very weak and the Fed is thinking about adding a lot of liquidity to prevent another collapse. Given the relative strength of the dollar and due to the fact that many people have to sell winning positions to make up for losers it may have an opportunity to try another operation that supports the markets. But given the Fed's leveraged balance sheet kicking the can down the road too much longer may no longer be an option.

 
At 5/31/2012 12:11 PM, Blogger morganovich said...

v-

i have an article you may enjoy.

this is a speech my friend gave at the april grant's conference on why loose money is the problem, not the solution at this point.

http://www.huffingtonpost.com/david-einhorn/fed-interest-rates_b_1472509.html

david gives fantastic and insightful speeches. worth a read.

 
At 5/31/2012 1:50 PM, Blogger Ron H. said...

morganovich: "this is a speech my friend gave at the april grant's conference on why loose money is the problem, not the solution at this point."

Thanks.

 
At 5/31/2012 7:06 PM, Blogger VangelV said...

this is a speech my friend gave at the april grant's conference on why loose money is the problem, not the solution at this point.

http://www.huffingtonpost.com/david-einhorn/fed-interest-rates_b_1472509.html

david gives fantastic and insightful speeches. worth a read.


Thanks. While I agree with David Einhorn I do not believe that he goes far enough. There is no moral or legal justification for allowing the Fed to manipulate interest rates and create money out of thin air. As long as it stays in business it will continue to make the type of errors that he is talking about.

 
At 5/31/2012 7:16 PM, Blogger morganovich said...

i think you take that a bit too far.

money supply increasing in tandem with real growth is a good, not a bad thing. you get liquidity problems otherwise.

if one has an independent cb with one and exactly one mandate: maintain price stability, this can work. the bundesbank was very good at this.

the minute they try to promote full employment or moderate the business cycle, you get a disaster.

i have been thinking about a sort of best of both world currency. something convertible but that grows with an economy. it occurs to me that one could base a currency on killowat hours or some such and perhaps get a good result (if you could avoid a power plant bubble, but at least that's somehting useful unlike a shiny rock)

you also need a cb to act as a lender of last resort. any bank that uses fractional reserve can become illiquid even if still totally solvent.

you need an asset based lending facility for times of systemic panic. but it needs to be asset based and very strict about collateral (and to charge significant interest for the privilege) to avoid moral hazard.

 

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