By Bob Willis
Aug. 14 (Bloomberg) -- U.S. industrial production probably rose for the first time in nine months after mid-year retooling at automakers and as a federal “cash-for-clunkers” program spurred demand for cars, economists said before reports today.
Output at manufacturers, mines and utilities climbed 0.4 percent, erasing the previous month’s decline, according to the median forecast in a Bloomberg News survey ahead of today’s report from the Federal Reserve. Other data may show the cost of living was unchanged in July while consumer confidence rose this month.
General Motors Co. and Chrysler Group LLC, the two U.S. automakers that emerged from bankruptcy, reopened plants and benefited from cash incentives to buy fuel-efficient cars. A record-breaking drawdown in inventories in the first half of 2009 has set the stage for a ramp-up in output that will help pull the economy out of the worst recession since the 1930s.
“The reason for the big spike is mostly the revival of GM and Chrysler from shutdowns, and recovery from inventory adjustment” at other factories, Mike Montgomery, a U.S. economist at IHS Global Insight in Lexington, Massachusetts, said before the report. “July is probably the start of the manufacturing recovery.”
The Fed’s production figures are due at 9:15 a.m. in Washington. Estimates from the 71 economists surveyed ranged from a decline of 0.2 percent to an increase of 2.5 percent. The projected gain would be the first since October, the month after Lehman Brothers Holdings Inc. collapsed, accelerating a meltdown in markets that rippled through the global economy.
Auto Restructuring
GM emerged from 39 days of restructuring on July 10 as a leaner company majority-owned by the U.S. government. Chrysler left court protection on June 10 under an alliance with Italy’s Fiat SpA. The Treasury Department helped bankroll the reorganizations, with $65 billion for Detroit-based GM and $12 billion for Auburn Hills, Michigan-based Chrysler.
They are joining other carmakers such as South Korea’s Hyundai Motor Co. in renewing output after slashing stockpiles. Automakers added 28,200 workers in July, the biggest 1-month gain in more than a decade, the Labor Department said last week.
Industry data showed sales of cars and light trucks rose to an 11.2 million unit annual pace in July, the highest since September, after the Obama administration offered credits of as much as $4,500 to trade in gas-guzzlers for more fuel-efficient vehicles.
‘Booster Shot’
The jump in sales may prompt further gains in production this month. GM will look at introducing third shifts, paying overtime and reopening more closed plants as a result of the incentives, Mike DiGiovanni, a sales analyst for the company, said last week in a Bloomberg Television interview.
“We are looking at the cash-for-clunkers as a booster shot to get us through the fragile economic recovery,” he said.
Higher consumer confidence also would give factories a reason to produce. The Reuters/University of Michigan preliminary survey on consumer sentiment for this month may show at about 10 a.m. that confidence rose to 69 from 66 at the end of July, according to the survey median.
The Standard & Poor’s 500 Index has soared 50 percent from its 12-year low on March 9, on forecasts that the economic contraction is slowing. It closed up 0.7 percent yesterday at 1,012.73 in New York.
Capacity Use
The industrial production report may show capacity utilization, or the proportion of plants in use, rose to 68.3 percent from a record low of 68 percent reached the month before, according to the survey.
Economists track plant operating rates to gauge factories’ ability to produce goods with existing resources. Lower rates reduce the risk of bottlenecks that can force prices higher.
At 8:30 a.m., Labor Department figures may show the consumer-price index was unchanged last month after gaining 0.7 percent in June. So-called core prices, which exclude food and fuel, probably increased 0.1 percent after gaining 0.2 percent, the survey showed.
Prices likely fell from the same time last year by the most in six decades, reinforcing projections that inflation will be contained. A report yesterday from Labor showed prices of imported goods dropped in July as the cost of commodities such as petroleum and chemicals decreased.
“Substantial resource slack is likely to dampen cost pressures,” Fed policy makers said Aug. 12 at the end of a two-day meeting in Washington as they kept interest rates unchanged near zero. Fed officials said the central bank’s monetary policy committee “expects that inflation will remain subdued for some time.”
Bloomberg Survey
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CPI Core Ind. U of Mich
CPI Prod. Conf.
MOM% MOM% MOM% Index
===============================================================
Date of Release 08/14 08/14 08/14 08/14
Observation Period July July July Aug. P
---------------------------------------------------------------
Median 0.0% 0.1% 0.4% 69.0
Average 0.0% 0.1% 0.5% 68.9
High Forecast 0.3% 0.2% 2.5% 75.0
Low Forecast -0.3% -0.1% -0.2% 64.0
Number of Participants 76 75 71 61
Previous 0.7% 0.2% -0.4% 66.0
---------------------------------------------------------------
4CAST Ltd. 0.0% 0.1% 0.2% 69.5
Action Economics 0.1% 0.2% 1.8% 68.0
AIG Investments -0.2% 0.0% 0.8% 68.0
Ameriprise Financial Inc -0.1% 0.2% 0.4% 69.0
Argus Research Corp. 0.3% 0.2% -0.1% 70.0
Banesto --- --- 0.0% 67.9
Bank of Tokyo- Mitsubishi 0.3% 0.2% 0.0% 64.6
Bantleon Bank AG 0.0% 0.2% 0.1% 69.0
Barclays Capital 0.1% 0.1% 1.5% 69.0
BBVA -0.1% 0.2% -0.1% 68.4
BMO Capital Markets -0.1% 0.0% 0.4% 69.0
BNP Paribas 0.0% 0.1% 0.3% 69.0
Briefing.com 0.0% 0.1% 0.5% 70.0
C I T I C Securities 0.1% --- --- 68.0
Calyon 0.0% 0.2% 1.2% 68.0
Capital Economics -0.1% 0.1% 1.0% 68.0
CIBC World Markets 0.1% 0.2% 0.6% 68.0
Citi -0.1% 0.1% --- ---
ClearView Economics 0.1% 0.1% 0.0% ---
Commerzbank AG 0.0% 0.1% 2.5% 70.0
Credit Suisse 0.0% 0.1% 1.6% 70.0
Daiwa Securities America 0.0% 0.2% 1.0% 68.5
Danske Bank 0.3% 0.2% -0.2% 72.0
DekaBank 0.1% 0.2% 0.3% 70.0
Desjardins Group -0.1% 0.2% 0.3% 67.0
Deutsche Bank Securities 0.0% 0.2% 0.4% 75.0
Deutsche Postbank AG -0.1% 0.1% 0.2% ---
DZ Bank 0.1% 0.2% 0.5% 70.0
Exane 0.1% 0.0% 1.0% 64.0
First Trust Advisors 0.1% 0.2% 1.2% 70.0
Fortis 0.1% 0.2% 0.0% ---
FTN Financial 0.1% 0.0% 0.2% 70.0
Goldman, Sachs & Co. 0.0% 0.1% 0.3% ---
Helaba 0.0% 0.1% 0.2% 68.0
Herrmann Forecasting -0.1% 0.0% 0.6% 69.0
High Frequency Economics 0.0% 0.1% 0.4% 68.0
HSBC Markets 0.1% 0.1% 0.3% 69.0
IDEAglobal -0.1% 0.1% 0.5% 68.0
IHS Global Insight 0.1% 0.2% 0.8% 70.0
Informa Global Markets 0.0% 0.1% 0.5% 67.0
ING Financial Markets 0.2% 0.2% 0.3% 69.0
Insight Economics -0.2% 0.1% 0.5% 68.0
Intesa-SanPaulo -0.3% 0.1% 0.2% 66.0
J.P. Morgan Chase 0.1% 0.1% 1.5% 68.0
Janney Montgomery Scott L -0.3% 0.0% 0.2% ---
Landesbank Berlin 0.1% 0.0% 0.3% 64.0
Maria Fiorini Ramirez Inc 0.0% 0.1% --- ---
Merrill Lynch/BAS 0.0% 0.0% 0.8% 72.0
MFC Global Investment Man 0.0% 0.2% 0.5% 69.0
Moody’s Economy.com 0.0% 0.1% 1.5% 68.5
Morgan Keegan & Co. 0.0% 0.1% 0.2% ---
Morgan Stanley & Co. 0.0% 0.1% 0.7% ---
National Bank Financial -0.1% 0.2% --- 68.0
Natixis -0.1% 0.1% --- ---
Newedge 0.1% 0.2% 0.2% ---
Nomura Securities Intl. 0.0% 0.2% 0.6% ---
Nord/LB 0.2% 0.2% 0.0% 70.0
PNC Bank 0.1% 0.2% 1.0% ---
Raymond James 0.0% 0.1% 0.1% 68.2
RBC Capital Markets 0.1% 0.2% 1.0% 67.0
RBS Securities Inc. -0.1% 0.0% 0.3% 69.0
Ried, Thunberg & Co. 0.0% 0.2% 1.2% 70.0
Schneider Foreign Exchang 0.2% 0.2% --- 74.2
Scotia Capital 0.0% 0.2% 0.4% ---
Societe Generale 0.2% 0.1% 0.1% 68.0
Stone & McCarthy Research -0.1% 0.1% 0.0% 70.0
TD Securities 0.2% 0.2% 0.5% 70.0
Thomson Reuters/IFR -0.2% 0.0% 0.1% 71.0
UBS Securities LLC 0.0% 0.1% 0.7% 71.0
UniCredit Research 0.0% 0.1% 2.0% 71.0
Union Investment 0.2% 0.1% 0.1% ---
University of Maryland 0.1% 0.2% -0.1% 68.0
Wells Fargo & Co. -0.2% 0.1% 0.1% ---
WestLB AG 0.0% 0.1% -0.1% 68.0
Westpac Banking Co. -0.1% -0.1% 0.5% 70.0
Woodley Park Research 0.1% 0.2% 0.1% 68.5
Wrightson Associates 0.0% 0.2% 1.2% 70.0
===============================================================
To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net
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