Over the past several months, many pundits were scratching their heads at the peculiar patterns in summer hiring and layoff trends, which threw all NFP, claims, and JOLTs forecasts in a loop making a mockery of even the best forecasters. The reality is that there was a very specific reason for this abnormal seasonal pattern: numerous car plants worked throughout the summer, avoiding traditional temporary shutdowns and furloughs, in an attempt to provide an optical boost to the Union-endorsed administration. And as always happens (see Cash for Clunkers), every attempt to pull demand or supply from the future to the present results in an eventual collapse in either of these two. Sure enough, with June and July reaping the benefits of advance demand, August is set be an absolutely abysmal month for US auto assemblies and for Industrial Production. Because as Stone McCarthy calculates, based on projections provided by Wards Autos, the U.S. motor vehicle assembly rate for August is projected to decline by 8% to a 10.1 million annualized rate after rising by 4.4% in July. This would be the biggest monthly percentage decline in the assembly rate in about a year and a half, since April 2011's 9.5% drop.
For the Fed's industrial production report, we project motor vehicle output to decline by 4% in August after rising by 3.3% in July. The anticipated decline in motor vehicle output will restrain industrial activity in August. In July, industrial output rose by 0.6% with manufacturing output up 0.5%.
And since Industrial Production feeds directly into bean counter models for GDP calculations 2%+ GDP forecasts for Q2 are about to see their floor falling off and the economy return to a sub-stall speed growth rate, even as the growth rate of debt refuses to budge lower by even one iota.