Economy
Mexico’s Winning the NAFTA Auto Race
Written by Tim Triplett
September 20, 2017
The latest data on automotive production offers potential ammo to U.S. trade officials as they work to renegotiate the North American Free Trade Agreement. Assembly of both cars and light trucks is shifting from the U.S. to Mexico, with Canada largely on the sidelines.
Total light vehicle production in the U.S. and Canada has declined by 4.4 percent in the past 12 months, while in Mexico it has increased by 10.3 percent. Figures from the latest three-month period of June-August show an even more dramatic shift, with the U.S. down by 13 percent, Canada down by 8.1 percent, and Mexico up by 7 percent.
Until this year, U.S. market share of light trucks hadn’t changed much since mid-2009. In the three months through August, the U.S. share contracted by 5.3 percent while Mexico’s share of light trucks jumped by 32 percent, compared to the same period in 2016. Canada’s share declined by 6.9 percent. The U.S. share of light trucks is now 68.6 percent and Canada’s is 12.9 percent. Mexico’s share has hit a high of 18.6 percent, and counting.
Vehicle sales were expected to log a year-over-year increase in August for the first time this year until Hurricane Harvey walloped metro Houston late in the month. Edmunds.com estimates the storm and resulting floods wiped out 2 percent of the month’s anticipated new-vehicle sales. But the damage to the existing stock of vehicles in Houston was likely much greater. Cox Automotive estimates 300,000 to 500,000 vehicles were lost or damaged in the Houston area alone—a hit totaling up to $5 billion, making Harvey the costliest storm ever in terms of vehicle damage.
Experts are still debating how long it will take to replace the vehicles damaged by Harvey, as well as Hurricane Irma in Florida, and whether consumers will opt for new or used cars and pickup trucks. Used car prices were at record highs before the storm. Urgent demand for replacements may drive used prices even higher, prompting buyers to opt for new vehicles instead. Thus, the hurricanes that struck the South could prove to be a windfall for automakers in the fourth quarter.
Tim Triplett
Read more from Tim TriplettLatest in Economy
Architecture firms struggle through April
For the third month in a row, architecture firms reported a reduction in billings through April, according to the latest Architecture Billings Index release.
House committee blocks GOP budget proposal
The budget proposal has big implications for steel and manufacturing.
Manufacturing in New York state contracts again in May
Manufacturing activity in New York state declined for the third consecutive month, according to the May Empire State Manufacturing Survey from the Federal Reserve Bank of New York. Responding firms continue to forecast weaker business conditions in the coming months.
Chicago Business Barometer falls back in April, remains in contraction
The Chicago Business Barometer declined in April, reversing March’s gains, according to Market News International (MNI) and the Institute for Supply Management (ISM).
Fewer manufacturers optimistic about the economy
PMA’s April report shows that only 16% of surveyed manufacturers anticipate an increase in economic activity in the next three months (down from 23% in March)