Industrial production gain not as good as it looks

Today the Federal Reserve announced that manufacturing output rose 1.1% in July, led by an 9.9% gain in the output of motor vehicles and parts. Over the past year, the output of motor vehicles and parts rose by 32.6%.

But remember, this is an output gain, not a value-added gain. Output measures the number of motor vehicles and parts leaving domestic factories. But it doesn’t take into account any increase in offshoring–that is, use of imported parts.

It turns out that over the past year, imports of motor vehicle “parts, engines, bodies and chassis” rose by 79%. Yowza.

The implication is that there are a lot more imported parts and engines going into ‘American-built ‘ cars and trucks.  So value-added in the domestic auto industry–which is what really matters–went up less, maybe a lot less, than 32.6%.


Comments

  1. Why is this? Is it the minimum wage?

  2. Is there a story that the Detroit bailouts drove new cost reductions the car companies had previously resisted: more imported parts? Or did a number of small American parts outfits go under around the time of the bailouts?

  3. Interesting vaguely related tidbit:

    `Take factories. “I can tell you definitively that it costs $1 billion more per factory for me to build, equip, and operate a semiconductor manufacturing facility in the United States,” Otellini said.

    The rub: Ninety percent of that additional cost of a $4 billion factory is not labor but the cost to comply with taxes and regulations that other nations don’t impose. (Cypress Semiconductor CEO T.J. Rodgers elaborated on this in an interview with CNET, saying the problem is not higher U.S. wages but anti-business laws: “The killer factor in California for a manufacturer to create, say, a thousand blue-collar jobs is a hostile government that doesn’t want you there and demonstrates it in thousands of ways.”) `

    The link:
    http://news.cnet.com/8301-13578_3-20014563-38.html

Trackbacks

  1. […] Mike Mandel adds some perspective on why GM might not need more workers: Today the Federal Reserve announced that manufacturing output rose 1.1% in July, led by an 9.9% gain in the output of motor vehicles and parts. Over the past year, the output of motor vehicles and parts rose by 32.6%. […]

  2. […] the federal reserve announced that manufacturing output increased 1.1 percent in July – which is a significant improvement over the .5 percent decline in June – the number may be […]

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