'Car industry is key to manufacturing sector's first growth figure in a few months'

Car industry is key to manufacturing sector's first growth figure in a few months

08/26/09 08:07

Signs of life in the bruised car industry helped the entire manufacturing sector have its best month starting early 2008 during last June. Official figures show that the sector had an output of 0.4%, the highest output since January 2008.

The 13.5% increase in car production--the highest since January 2007--is pointed out to be the reason behind this significant increase. During the three months leading to June, automobile production already rose by 10.1%, although this is still significantly lower than the production during the same period last year.

It can be remembered that the car industry has been battered by the economic slowdown due to a slumping demand and a drought in car loan financing. Various governments came to the rescue with various expensive stimulus programs, including incentives to replace old cars with new ones (i.e. the Cash for Clunkers program).

Overall, this increase in automobile production is the highest among the main components of the manufacturing industry. Other factors to consider were transportation equipment, electrical and optical equipment, and mining output. A decline in the chemicals industry offset these increases. For the exact figures, you may refer to this article from The Independent.

According to the article, the data will be used by the Monetary Policy Committee to decide whether it will give further aid to the economy and by how much.

Some economists, however, were quick to argue that the recovery is still in its early stages and should be monitored carefully. It is fortunate that we are already already experiencing recovery although they are still in trickles. However, we shouldn't be complacent and be wary about how we spend. We are in uncertain times. The recovery may be a fluke for all we know.

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