Good news in sticker shock

If you spend a lot of time looking at economic data, you’re already aware that 2013 hasn’t provided much to get excited about. It has provided glimmers of hope, but nothing to set the world on fire.

The unemployment rate has been moving downward, but slowly. Since January it slid from 7.9 percent to 7.3 percent, according to the Bureau of Labor Statistics. The recent high and low points in unemployment were 10 percent (Oct. 2009) and 4.4 percent (May 2007). In July, the Census Bureau reported that 954,000 construction permits were issued for nonresidential construction (that’s seasonally adjusted at an annual rate). That’s a lot better than 513,000 (March 2009) but nothing close to 2,263,000 (Sept. 2005). According to WardsAuto.com, U.S. car production continues to recover from the Great Recession, but nevertheless in July of this year was 8 percent below the July 2012 production volume. According to Baker Hughes, 1,767 oil rigs were in operation in North America in early September. This is up from the depths of the recession (876 in June 2009) but not as strong as it was almost two years ago (2,026 in Nov. 2011). Even consumer confidence, as tracked by the University of Michigan’s Surveys of Consumers, looked great in July, but slumped a bit in August; after setting a six-year peak in July at 85.1, it came in at 82.1 in August.

The bright spot, and it’s a white-hot bright spot, is the PMI. In August it was solid at 55.7 percent. If you look back far enough, you’ll find that it has been in the 60s and it has been in the 30s. Such readings are rare. When the PMI is in the 50s, manufacturing is going strong. It’s probably safe to say that manufacturing is leading the way out of this recession and the other industries are going to continue to recover. The main question concerns how long this will last. Two indicators suggest tempered optimism.

First, a predictive component of the PMI, the new orders index, reached 63.2 percent in August. Second, a close look at the average automobile price reveals the consumers have been spending a little more for some time.

An article by Tom Krisher, “Car prices hit record as buyers load in options” tells the story in detail. The essence of the story is that the record-low interest rates over the last few years have made it easy to pack on extra options without significantly inflating the value of the loan. According to the article, “The average sale price of a vehicle in the U.S. hit $31,252 last month, up almost $1,000 over the same time last year.”

This might not sound all that important if you’re not in the automotive industry, but indeed it is. It reflects a growing confidence among consumers, and this is a bit of good news for manufacturers in every industry.