Issue: Oct 2009


Industrial Production Stages "Decent Recovery" Even Without Popular "Cash for Clunkers" Program



IHS Chief Economist Nariman Behravesh's analysis and commentary on September Industrial Production

by Nariman Behravesh, Chief Economist, IHS

Bottom Line

Ø Industrial production rose 0.7% in September. The August rise was revised up from 0.8% to 1.2%.

Ø In the third quarter the rise in industrial production was 5.2%, the first quarterly rise since the recession began in late 2007.

Ø The manufacturing sector saw gains of 0.9% in September, and a 7.1% rise in the third quarter, the biggest increase since 1999.

Ø Some of the sharp increase in production in the past three months was due to the "cash for clunkers" program. Excluding motor vehicles and parts, manufacturing output was up 0.5% in September and 3.8% for the third quarter—still a respectable showing.


Outlook


The sharp rise in third quarter industrial production is not sustainable. Some of the rise was due to a temporary boost from the "cash for clunkers" program and inventory rebuilding. Nevertheless there are clear signs of a broad-based recovery in most of the industrial sectors. This means that industrial production growth will remain firmly in positive territory in the coming quarters, but will ease back a little as the effects of the temporary factors wear off.


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