by Taras Berezowsky
Will U.S. car sales continue to rise, improving the health of the auto sector? Earlier this week, we mentioned how Alcoa's (NYSE:AA) confidence in auto market growth fueled the company's decision to step up operations. Today, the aluminum producer breaks ground on an expansion of its rolling mill in Tennessee to up its quota of auto-grade aluminum sheet. "Over the next three years, the company expects to invest $275 million in the project to meet the growing demand of the auto manufacturing industry," one report stated.
So it looks as though Alcoa has placed its bet on the U.S. car market for the longer term. If we go by the pricing trends of the metals that go into an automotive OEM's buy (see the chart above; aluminum is a significant input), as we reported in this report earlier this month, it seems we hit the bottom in July.
But it will be interesting to see in which direction that line goes next month, for September's index reading – especially in light of recent information on the automotive sector.
Turns out, auto sector production dropped in the past month after trucking pretty hard there for a while, dropping 0.4 percent last month. "The rallying automotive sector took a breather in July and that was the biggest reason for the Chicago Fed Midwest Manufacturing Index to drop 0.1% to 95.8," according to a manufacturing report in Industry Week. (Meanwhile, steel industry production in the Midwest rose 1.5 percent.)
Will this automotive production drop be reflected in our September Automotive MMI®? And, by extension, will bets such as Alcoa's pay off in the long run?