A month ago, when we commented [4]on the most recent surge in US manufacturing production, when it jumped by 0.7% offsetting a tumble in utilities and mining output and leading to a 0.4% jump in overall Industrial Production (since revised to only 0.2%), we observed that this was entirely due to the second, and more nuanced, coming of the cash for clunkers bubble, as the explosion in subprime loans pushed production of Motor Vehciles and Parts to the highest since 2009's disastrous CARS [5], aka Cash for Clunkers, program.
This is what the latest subprime bubble looked like a month ago when translated in terms of actual car manufacturing:
[6]
A month later, one can kiss the US subprime-driven "manufacturing renaissance" goodbye. The reason, as we reported moments ago, Industrial Production dropped 0.1%, [7]driven by a -0.4% contraction in manufacturing, the worst print since the "harsh winter collapse" of January 2014.
The answer to the key question, what drove the tumble, is simple: what goes up has come down, in this case production of Motor Vehciles and Part, after posting its best number in 5 years, just posted... it worst monthly drop in five years, or since May 2009 to be precise.
As the chart below shows, following July's month's 9.3% surge in production of motor vehicles and parts, August has come and wiped out all the gains, with a 7.6% plunge, the bigest collapse since May 2009.
[8]
So has the second subprime auto debt bubble burst yet? One month may be too soon to make a formal determination, but now that the sentiment surveys have no choice but to follow the hard data in crashing next month, watch as suddenly sentiment goes from euphoria to depression as Americans appear to have gotten their fill of subprime-funded clunkers.
