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Thursday, August 20, 2009

Manufacturing Returns to Growth, Leading Indicators Up, Car Factories Recall Workers

Manufacturing in the Philadelphia Federal reserve's region unexpectedly expanded in August for the first time in almost a year. Thursday's report is yet another sign that Q3 economic growth will indeed be stronger than many continue to purport.

According to the report: "The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from -7.5 in July to 4.2
this month. This is the highest reading of the index since November 2007"

The growth in manufacturing activity was far better than any of 52 economists had forecast in a Bloomberg survey of the prognosticators.

It was the second strong regional showing for manufacturing this week. The New York Fed’s Empire index, released on Monday, showed that the NY region’s manufacturing sector also grew for the first time in more than a year.

Additionally the Conference Board's index of leading economic indicators climbed 0.6 in July after rising 0.8 percent the prior month. It is the first time the index has climbed for four straight months since 2004.

Earlier this week GM said it called back 1,350 union workers, its biggest one-time increase in jobs since 2006, as new car sales are significantly exceeding expectations. Across the board US auto factories are now adding shifts, scheduling overtime, and restoring weeks of production at select factories following the significant success of the Cash for Clunkers stimulus program.


  1. GNE, do you mean to say "new car sales are significantly exceeding expectations" not "...are not exceeding...?"

  2. GM also stated that it will call back at least 1,050 at it's Lordstown, Ohio plant for it's second shift starting October 5th. This will no doubt also allow it's suppliers to call back their workforce as well. Although I'm not an economist (nor a business major), this should mean about 5,000 to 10,000 non-union suppliers dealing with GM should be called back as well. My only concern is what will happen to small car sales once "Cash for Clunkers" winds down.

  3. GNE,

    Do you think yesterday's report on the $9 trillon deficit means Congress will have to raise taxes and that will thwart the recovery or make it very hard for the US to sell enough T bills to cover the deficit?


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