Aerospace Production Likely to Grow Faster in 2014
Orders for new planes at Boeing and Airbus were quite strong during the summer of 2013, but these orders have not yet translated into significant growth in aerospace industrial production. Production during 2013 was relatively flat compared to 2012. In fact, the month-over-month rate of change in production contracted at a very moderate rate from July to October. This resulted in decelerating growth in aerospace industrial production for the year.
However, this trend of decelerating growth in production looks like it should switch to accelerating growth in 2014. A good indicator for aerospace industrial production is system revenue passenger miles (SRPM), a measure that tracks the number of passengers on every flight in the U.S. and how far that flight travels. On average, changes in SRPM lead changes in aerospace industrial production by about one to two years. From May to August of 2013, the month-over-month rate of change in SRPM was growing at its fastest rate since the summer of 2011. Therefore, the annual rate of change (see chart) should grow faster in the latter part of 2013. And, if the historical pattern holds, then the rate of change in aerospace industrial production should start growing faster around the summer of 2014.
You can see all of our data on the aerospace market, including a business index for the aerospace industry, at gardnerweb.com/forecast/aerospace.htm.
Motor Vehicle and Parts Production at All-Time High
The industrial production index for motor vehicles and parts set an all-time high in October 2013, the most recent month of data. Since 2009, the annual rate of change in production has been growing at its fastest rate since the early 1980s. While the growth rate has slowed down recently, it is still quite high historically (see chart).
Motor vehicle and parts spending is an excellent indicator of production of these parts. Historically, there has been a tight relationship between the two data series, with changes in spending leading changes in production by about three to six months. Despite the financial collapse a few years ago, this general relationship still holds, but the timing of the changes between the two data series has been thrown off some as the automotive industry has seen such dramatic changes in production and capacity levels in the last four years.
Heading into 2014, it looks like there will be continued decelerating growth in spending on motor vehicles and parts, at least in the first half of the year. However, leading indicators show that the rate of change in spending could turn around in the second half of 2014. It seems likely, therefore, that motor vehicle and part production will grow at a slower rate throughout the year.
You can see all of our data on the automotive market, including a business index for the automotive industry, at gardnerweb.com/forecast/automotive.htm.