The Atlanta Fed's SouthPoint offers commentary and observations on various aspects of the region's economy.
The blog's authors include staff from the Atlanta Fed’s Regional Economic Information Network and Public Affairs Department.
Postings are weekly.
Seeking the Slack
Where is the excess slack in the labor force?
Last week, the April Employment report from U.S. Bureau of Labor Statistics reported that the unemployment rate (U-3) edged down slightly to 5.4 percent (after rounding) over the prior month, which is well below the high of 10.0 percent in late 2009. Despite this encouraging improvement, wage growth remains low, and many agree that slack remains in the labor market. The consensus of the Federal Open Market Committee (FOMC) has been that more progress can be made, as noted in the Chair’s press conference in March. One factor we have been paying particular attention to here at the Atlanta Fed is excess slack in the labor market captured in the U-6 unemployment rate, which includes the unemployed, those who are working part-time but would prefer full-time employment (part-time for economic reasons, or PTER), and those who have stopped looking for work during the last 12 months but were willing to work (marginally attached).
Below is a chart showing the U-3 unemployment rate (depicted in blue) and the U-6 rate (in red). The difference between the two is often referred to as “the gap,” and this area shaded below in light red represents the excess slack in the labor force. Between 2000 and 2008 the gap averaged 3.7 percentage points but then rose to a high of 7.3 percentage points during the recession. Since late 2011, the gap has declined and was 5.4 percentage points in April, but it remains well above the usual amount of excess slack in the labor force experienced earlier in the decade. Earlier analysis by my Atlanta Fed colleague Pat Higgins identified a significant connection between U-6 and the subdued wage growth the economy has experienced in recent years.
Just as the U-3 unemployment rate varies widely across states, so too does U-6.
Below is a map that shows where the gap between U-6 and U-3 was greatest during the first quarter of 2015. States shaded in red have a gap higher than the United States overall, and states with a lower-than-average gap are shaded in green.
Twenty-one states are shaded red, and they are mostly concentrated along the West Coast, the Southeast, and the Great Lakes region. The gaps were largest in Arizona, Nevada, and California, respectively—the so-called Sand States—where the housing boom and bust were most dramatic.
The gap was below the U.S. average in 29 states and Washington, DC. Notably, the central part of the country is shaded green. The smallest gap is in North Dakota, South Dakota, and Wyoming, states that have benefited in recent years from a boom in mining activity or energy extraction.
Of course, a large or small gap relative to the U.S. average does not tell us if the gap is unusual. For example, the red states in the chart also tend to be states whose U-3 rate and U-6 rate are also above the U.S. averages.
A way to get a sense of whether the gaps are abnormally high is to compare the gap on a state-by-state basis with that state's average gap prior to the Great Recession. (Here, I use data from 2003 to 2007 to create a prerecession baseline for each state.) As the map below shows, most states remain above their prerecession average gap and are shaded red, although a few exceptions are shaded green and sit slightly below the prerecession average. Nevada and Arizona's gaps remain stubbornly high and actually worsened in the latest quarter.
Clearly, many states have a ways to go to attain the average labor market conditions they experienced prior to the Great Recession.
By Whitney Mancuso, a senior economic analyst in the Atlanta Fed's research department
Middle Tennessee Consumer Confidence on the Rise
Last week, the Federal Reserve Bank of Atlanta's research director Dave Altig wrote a macroblog post that emphasized the importance of consumer spending as the economy tries to rebound from a disappointing first quarter. Incoming data indicate that consumers haven't been willing to open up their wallets as much as expected considering recent economic conditions. The underlying fundamentals that influence consumer spending would suggest a higher level of consumption than the economy is currently experiencing. In a recent speech, Atlanta Fed President Dennis Lockhart pointed out these fundamentals, which included real personal income growth, household wealth, access to credit, and consumer confidence. According to the Middle Tennessee Consumer Outlook Index, released on May 1, Middle Tennessee has the confidence fundamental covered.
The Middle Tennessee Consumer Confidence survey is conducted by the Office of Consumer Research at Middle Tennessee State University, headed by Professor Timothy Graeff. Students in Graeff's marketing research course conduct the survey by phone. The 11-question survey asks questions related to economic conditions in the United States as well as Middle Tennessee.
The overall index rose to its highest level since June of 2004 (see the chart).
Participants felt particularly more optimistic about the local economy than the national economy. A solid 65 percent of survey participants indicated that business conditions in Middle Tennessee were good, but only 27 percent felt that conditions were good for the nation.
Looking forward, the future expectations index also rose since the last survey, suggesting that people are more optimistic about the economy over the near term. When asked what conditions for Middle Tennessee would be like in six months, 44 percent indicated things would be better, and 50 percent felt things would be about the same. The national numbers were less optimistic than the local but still represented an improvement over the last survey, with 26 percent indicating conditions would improve and 57 percent stating conditions would stay about the same.
The national consumer confidence indexes have trended up overall since the depths of the recession but still have not reached levels seen in the mid-2000s (see the chart).
Still, as Dave Altig pointed out in his macroblog post and President Lockhart in his speech, the fundamentals suggest that consumer spending will pick up in the not-too-distant future. Our confidence may be slightly guarded, but we are optimistic. Just like Middle Tennessee.
By Troy Balthrop, a senior Regional Economic Information Network analyst in the Atlanta Fed's Nashville Branch
Trials and Tribulations in Transportation
Members of the Atlanta Fed's Trade and Transportation Advisory Council convened on April 7 at the Atlanta Fed's Jacksonville Branch to discuss the Southeast latest developments in this sector.
Just over half of council members reported an expansion of overall activity compared with the same period last year. A few members reported reduced freight activity, citing the primary causes as both a decrease in movement of materials related to oil exploration and the appreciation of the U.S. dollar against the euro. Members noted that severe winter weather affected shipments for railroads and truckers primarily throughout the north and northeast United States, and the West Coast ports situation disrupted supply chains across the country. East Coast port volumes are now over capacity as shippers began diverting cargo away from the West Coast. Council members anticipate that it will be August before the backlog of port cargo will be cleared, a situation that may adversely affect the peak fall shipping season. However, members believed that many of the structural problems of the West Coast ports will remain in place long after the labor situation is resolved.
Employment, wage picture largely mixed
A majority of council members reported that employment levels were flat or slightly higher compared with this time last year, and two-thirds of council members expect higher workforce levels this time next year.
Truck driver shortages remained an almost universal concern for the industry. Technicians (formerly referred to as mechanics) are also in demand and harder to find as new federal emission requirements demand workers with more specialized skills.
Responses regarding wage pressures were mixed. Trucking companies continued to raise driver pay, as finding willing and qualified truck drivers remained difficult. Outside of specific areas of expertise, such as railroad engineers and technicians, employers were easily filling nondriver positions without increasing starting salaries. Logistics firms, however, perceived the labor market as tightening and reported more frequent voluntary turnover with "higher pay" being cited as a reason for leaving. Additionally, candidates were receiving multiple offers and enhanced benefits packages.
Nonlabor input costs and prices
A number of council members reported seeing some upward cost pressures in nonlabor inputs such as commercial insurance, equipment, locomotives and leases, ocean freight rates, and domestic trucking rates. The sharp decline in fuel costs, however, has helped keep overall costs down.
Almost all council members reported better pricing power since the last meeting in October 2014. Members indicated that some customers understand market forces and work to negotiate the best deal possible with their current carrier, but others shop around for the lowest cost. All council members anticipate greater ability to raise prices one year out and beyond, citing constrained capacity and expected higher commodity prices as the principal reasons, along with seeking to recover increased regulatory compliance costs.
International trade rises modestly
Council members with insight into international trade indicated modest growth in imports, related to the strong U.S. dollar against the euro and other foreign currencies and an improved domestic economy. Regions expected to drive demand for U.S. exports are South America and Asia as those economies continue to expand consumer buying power. Near-shoring is expected to become a bigger trend, and the automotive sector's investments in Mexico will drive greater cross-border growth between the United States and Mexico.
Two-thirds of council members expect higher growth in the short term. Over the next two to three years, three-quarters of members expect higher growth. When asked about the most challenging issues facing the transportation sector, responses varied by sub-industry. Driver shortages continued to be the headliner, along with regulatory issues, which continued to drive capacity out of the market and significantly push up operations costs. Broadly, the supply chain has been adversely affected by infrastructure constraints, and this impact could persist: the United States has a great need for well-planned and properly funded hard infrastructure investment in ports and road networks to get goods to market.
The council meets again in October, and SouthPoint will report whether the summer months reflect improving conditions for the movement of goods.
By Sarah Arteaga, a Regional Economic Information Network director in the Atlanta Fed's Jacksonville Branch
Southeast Manufacturing: Solid as an Oak
When I was a kid, I spent a few fall afternoons cutting and splitting firewood with my older brother. I must say that I didn't care for the process at all. It was hard work, and I have much respect for people that carry on the time-honored tradition. I learned quickly that there were certain types of wood you wanted to stay away from. Oak was one of them. Now, I am ashamed to say that I didn't pay close attention when collecting tree leaves for science class, but I always knew when I was trying to split a piece of oak. As a matter of fact, when I would come across a piece of oak, I preferred to skip over it. Oaks are strong and stately trees and no fun at all to split. The March Southeastern purchasing managers index (PMI) report, released on April 6, reminded me of my ill-fated attempts to split oak. It is one tough piece of wood.
The Atlanta Fed's research department uses the Southeast PMI to track regional manufacturing activity. The Econometric Center at Kennesaw State University produces the survey, which analyzes current market conditions for the manufacturing sector in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The PMI is based on a survey of representatives from manufacturing companies in those states and analyzes trends concerning new orders, production, employment, supplier delivery times, and inventory levels. A reading above 50 indicates that manufacturing activity is expanding, and a reading below 50 indicates that activity is contracting.
The March Southeast PMI's overall index declined slightly from February, falling 2.5 points to 58.0 (see the chart). However, the index has remained above the 50 threshold for expansion 14 out of the last 15 months. It also averaged a solid 58.0 during the first quarter.
- The new orders subindex fell 6.6 points to 56.9.
- The production subindex decreased 2.9 points compared with the previous month and now reads 61.8.
- The employment subindex declined 9.2 to 57.8. The March report indicated that manufacturing payrolls have now grown for 18 consecutive months.
- The supplier deliveries subindex increased 1.2 points to 54.9.
- The finished inventory subindex increased 5.2 points to 58.8.
- The commodity prices subindex rose 4.8 points and now reads 40.2.
Optimism for future production also increased in March. When asked for their production expectations during the next three to six months, 53 percent of survey participants expected production to be higher going forward, compared with 46 percent in February.
Much of the recent national manufacturing data have been weak. In March, the industrial production report indicated that manufacturing output increased 0.1 percent during February, but output had declined in the previous two months. New orders for core capital goods also declined for the sixth consecutive month in February and the March ISM index, although still indicating expansion, fell to its lowest reading since May 2013. Some analysts believe cold weather and the strong dollar are affecting overall manufacturing activity.
Despite the recent weak national numbers, southeastern manufacturing appears to be holding strong...just like the oak trees I tried to split as a kid. If you've never split wood—and especially a piece of oak—try it sometime. I doubt it will make your top-five list of things to do. Oak is one tough piece of wood.
The Fruits of Our Labor
February 2015 state-level labor market data from the U.S. Bureau of Labor Statistics (BLS) for Sixth District states was solid—on aggregate. Overall, the region contributed 45,900 net payrolls in February, which was 17 percent of the nation's 264,000 payrolls. The combined unemployment rate of District states declined 0.1 percentage point to 6.1 percent. In fact, the unemployment rate fell in all six states, which hasn't occurred in almost two years.
While it's important to look at the aggregate picture when thinking about labor market performance for the entire District, it's also meaningful to hone in on the drivers of that performance. Although the drivers are largely related to the sheer size of the labor force, in the case of February's job growth in Sixth District states, just two states contributed to the bulk of February's job gains (see the chart).
Georgia and Florida carry the weight of job growth
February was a standout month for the Peach State. With 25,400 net payrolls added, Georgia supplied more than half of the jobs of all Sixth District states combined, and was the second largest contributor to job growth in the United States. This over-the-month jobs figure was the most the state added in four years, also crushing its 2014 monthly average of 12,200 net payrolls. Job gains were widespread, but the industries that contributed the most net payrolls in Georgia were retail (up 5,300) and accommodation and food services (up 5,500). In fact, both industries have almost steadily added jobs on net each month in Georgia over the past two years (see the chart).
Not too far behind the Peach State in February was the Orange State, with 19,700 net jobs added. The largest gains came from the government (up 4,800; local government payrolls were up 3,200), retail (up 4,200), and health care and social assistance (up 3,700) sectors. Over the past two years, the retail and health care and social assistance industries, in particular, have contributed solid gains in the state. In reality, Florida has been a consistent contributor to Sixth District jobs growth for several years (see the chart).
Where did the other states stand? In addition to Georgia's 25,400 and Florida's 19,700 payrolls in February, Mississippi contributed 3,500 net jobs. The remaining states subtracted from job growth: Louisiana (down 700), Tennessee (down 800), and Alabama (down 1,200).
Unemployment rate declines in all states
All six states in the District experienced a decline in the unemployment rate in February, which hasn't occurred in almost two years (see the chart). The aggregate figure was 6.1 percent, slowly approaching the national rate of 5.5 percent. February rates by state were as follows: Alabama 5.8 percent, Florida 5.6 percent, Georgia 6.3 percent, Louisiana 6.7 percent, Mississippi 7.0 percent, and Tennessee 6.6 percent.
Keeping an eye on developing trends
I'll be paying attention to future data to spot this year's trends in regional labor market indicators and report back here.
By Rebekah Durham, economic policy analysis specialis t in the Regional Economic Information Network at the New Orleans Branch of the Atlanta Fed
Tracking Energy’s Trajectory
Last week, the Atlanta Fed's Energy Advisory Council convened to share industry experience during the last several months since gathering in November. I recapped some of the discussion elements following the November meeting here. At that time, the price of oil had declined by about 40 percent since its mid-June 2014 peak. From that time through last week, the pricing trend continued along a downward trajectory (though February saw a slight rise that tapered in March), with both Brent and West Texas Intermediate spot prices down by more than 50 percent from last year's peak (see the chart).
Also, when the council met in November, exploration and production (E&P) firms—marginal producers in particular—were the focus of concern as a result of falling energy prices and had begun to reevaluate business models and technologies and renegotiate cost structures with service providers. At that time, the council acknowledged that sustained or declining oil prices may lead to capital spending reductions. During last week's meeting, the general sentiment descended somewhat, and the discussion shifted from potential to definitive reductions in business activity, investment in particular.
Council members shared their opinion that energy investment had indeed slowed in the region, listing billions of dollars of project delays and cancellations of efforts not already underway, including more than just E&P firms. Oil-field service providers, industrial construction companies, and manufacturers of pipeline and other industrial equipment also felt the effects of low energy prices through reduced business activity. Furthermore, council participants reported that drilling permits for new oil wells declined in the region, which is a national trend that continues in the face of mounting production and supply of oil. (You can see updated drilling rig count information.) This reduced investment is important considering that nationally, energy is a big contributor to gross domestic product growth, as described in a recent Atlanta Fed macroblog post. In a nutshell, expectations for growth in 2015 declined among most advisory council members with direct ties to oil and gas production and/or support. However, they shared a general sense that the industry will see a pick-up after 2015 and that delayed projects will resume.
Conversely, two other sectors represented on the Energy Advisory Council continued to expand. Growth in utilities was strong, particularly the industrial segment, and the petrochemical industry experienced expansion in most business segments. In fact, we continue to receive reports about petrochemical investment along the Gulf Coast from council members and business leaders in the Atlanta Fed's Regional Economic Information Network. These industry exceptions were not a big surprise considering that both industries use oil and gas products as feedstock for operations; for them, lower energy prices are good for business.
So, where is the oil and gas industry headed, and will investment pick back up? Many factors are at play—for example, global economic growth and its relation to supply and demand, geopolitical events, oil storage levels, to name a few—and they are clouding my crystal ball. Nevertheless, on the whole, Energy Advisory Council members indicated that they will continue to approach 2015 cautiously and pay close attention to energy prices as a driver of decisions, and they expect that oil and gas investment and projects will accelerate beyond 2015.
Southeast PMI Surges in February
The Southeast purchasing managers index (PMI) report was released on March 5, and it indicates that any lingering effects from the late 2014 manufacturing slowdown have abated. If you recall, the December Southeast PMI dipped into contraction territory, but it has rebounded nicely since. The PMI index has risen 14.9 points since December and now sits at its highest reading since April 2014.
The Atlanta Fed's research department uses the Southeast PMI to track southeastern manufacturing activity. The Econometric Center at Kennesaw State University produces the survey, which provides an analysis of current conditions for the manufacturing sector in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The PMI is based on a survey of representatives from manufacturing companies in those states and analyzes trends concerning new orders, production, employment, supplier delivery times, and inventory levels. A reading above 50 indicates that manufacturing activity is expanding, and a reading below 50 indicates contracting activity.
The Southeast PMI's overall index rose 4.9 points to 60.5 in February (see the chart). The subindexes also suggest some positive future developments:
- The new orders subindex rose to 63.4, a 6.0 point increase over January and a 29.4 point increase over the last two months.
- The production subindex increased 3.5 points over the previous month and now reads 64.6.
- The employment subindex rose 7.8 points over January to 67.1, indicating that manufacturing payrolls grew for the 17th consecutive month.
- The supply deliveries subindex increased 1.8 points from the previous month to 53.7.
- The finished inventory subindex increased 5.5 points compared with January.
- The commodity prices subindex fell 1.7 points and now reads 35.4.
Optimism for future production fell in February. When asked for their production expectations during the next three to six months, 46 percent of survey participants expected production to be higher going forward, compared with 61 percent in January. The good news is that no survey respondents expect production to be lower than their current levels during the same time period.
The change in energy prices and severe winter weather are just a couple of challenges manufacturing faces. Some isolated reports of reduced orders from manufacturers closely tied to the energy sector have emerged, but on the other hand, the drop in oil prices has other contacts saving money on fuel costs. However, most contacts in the Southeast have expressed little direct energy-related effect on their business activity. Judging by the February PMI report, southeastern manufacturing is holding strong. We'll see if the positive momentum sustains into spring.
Tiny Bubbles in Alabama
Do you like to blow bubbles when you're chewing gum? I do. I recently discovered that bubbles are not just fun to blow when you're chewing gum—they can also be a fun and interesting way to visualize data. Yes, I said data. At the Atlanta Fed, we often use bubble charts to track and analyze certain data series. It is particularly helpful when we compare two bubble charts with the same information from different points in time.
In the charts below, which focus on Alabama, each bubble provides a static representation of a given value while also providing comparative information to other industries. The bubble size in these charts illustrates the most recent three-month average of jobs in that industry. The y (vertical) axis shows the three-month average annualized (or short term) job growth, and the x (horizontal) axis shows year-over-year (or long-term) job growth.
The chart is divided into four quadrants. A bubble in the upper-right quadrant (expanding) indicates positive movement in employment (both short- and long-term measures are positive), whereas the lower-left quadrant (contracting) indicates both measures are negative. The upper-left quadrant (improving) indicates the three-month measure is positive, but we're not seeing positive movement year over year. Lastly, the lower-right quadrant (slipping) is positive year over year, but the three-month measure is negative.
As you can see in the first chart, Alabama's leisure and hospitality employment in December 2013 was in the expanding quadrant. We interpret that as this sector has been making gains over the short and long run. This gain stands in contrast to the information sector, which contracted during both the short and long term, putting it firmly in the bottom-left quadrant.
Now, let's take a look at how some of Alabama's industries are doing. In December 2014, the leisure and hospitality sector was still expanding (gaining 8,800 jobs). According to the University of Alabama's Center for Business and Economic Research (CBER), the increase in leisure and hospitality is the result of staffing in food services and drinking places (restaurants, for example). CBER's Ahmad Ijaz said, "Restaurants are adding jobs all across the country."
The construction sector is in an even better position, moving from a contraction in December 2013 to expansion a year later. The Birmingham Business Journal, in an article from January 2015, said "Alabama is ranked eighth among the 50 states and the District of Columbia in construction jobs added." Likewise, the Alabama Department of Labor reported that Alabama "employment in the construction sector is at its highest point since November 2010."
Finally, a look at the manufacturing industry in Alabama also showed notable improvements. In 2013, it seemed like manufacturing employment was easing into the "slipping" quadrant, indicating a short-run slowdown. But 2014 saw it move firmly into the expanding quadrant. CBER's Ijaz tells us that this is the result of the automotive industry adding jobs from October 2013 to October 2014. He said that Alabama is one of the few states adding jobs in this sector. In September 2014, AL.com reported that Alabama's auto industry was projected to grow 2 percent in 2014 while the rest of the U.S. auto industry would contract about 4 percent.
So now that we've scrutinized past data, what are Alabama's employment projections for 2015? According to CBER's latest forecast, Alabama is expected to see stronger growth in employment in 2015 overall. I look forward to comparing bubble charts later in the year. In the meantime, I think I'll grab a piece (or two) of gum.
By Susan Remy, a Regional Economic Information Network analyst at the Birmingham Branch of the Atlanta Fed
Through the Eyes of a Big Fan
When Janet Yellen was named chair of the Board of Governors of the Federal Reserve System in February 2014, she became the fourth chair in my 30-year career here at the Atlanta Fed's Jacksonville Branch. While I vaguely remember Chairman Paul Volcker once visiting the branch, I was so new to the Bank and pretty naïve as to what the Fed actually did that I don't think I paid much attention back then. Soon after was Chairman Alan Greenspan, a brilliant man who spoke of economic conditions in a manner admittedly a bit hard for me to understand, especially since my Fed career began in an area not focused primarily on studying the economy. Then along came Chairman Ben Bernanke! Finally, someone who spoke in terms that even I could grasp. Couple his arrival with the creation of the Regional Economic Information Network and my foray into the world of economics (and the need for me to pay closer attention), I became an instant fan! I watched with great interest as Chairman Bernanke and the Federal Open Market Committee dusted off many lesser-known tools (as well as unveiling some brand-new tools) in the Fed's toolbox to help stimulate the economy during and after the Great Recession.
So, imagine my thrill at finding out that Chairman Bernanke was going to be a keynote speaker at this year's National Retail Federation's (NRF) annual conference that I had the great fortune to attend! I was like, whoop whoop! (I know, I'm just a big fan at heart!)
The morning of his appearance, I got up at zero-dark-thirty and was the first in line to enter the massive convention hall where he was scheduled to speak. I made a bee-line to the front and scoped out the best seat in the house. And I waited with anxious anticipation. I was like a teenage girl at her first rock concert when he took the stage. I listened intently as he and the president of Saks Fifth Avenue, who is serving as this year's NRF chairman, discussed the fallout from the global economic crisis and current prospects for the U.S. economy and the retail industry. It was amazing to listen to Bernanke speak in a much more casual manner (since now his comments do not necessarily move markets) about the events of the crisis and the actions taken by the Fed. (Remember, he is a scholar of the Great Depression of the 20th century and understood how the Fed could work to avoid the mistakes of the past.)
In addition to Chairman Bernanke sharing insights about the crisis with the audience, he commented on the transparency of the Federal Reserve System by saying, "In the middle of a crisis explaining where, why, and how we do what we do is as important as taking actions." When asked about the current state of the economy, Bernanke indicated that the U.S. economy is enjoying a genuine recovery. However, he has some concern regarding the European Union, noting that the situation should be watched carefully.
He was then asked what he missed most about being Fed chairman. He said that when he was chairman, he was driven everywhere by his security detail, so little things like traffic and finding parking spaces were never a concern. What he misses most, he said, "is not having to find my own parking spaces." He paused briefly and added, "That's all I miss."
How was I lucky enough to see Chairman Bernanke in person? As I mentioned, this was the NRF's annual conference, and one of my responsibilities as an analyst is to follow the retail sector and consumer behavior. So aside from my thrilling moment as a fan, what other insights did I glean at the conference? Well, when I attended the same conference two years ago, the underlying tone among participants was, "How do we get the consumer back to spending?" This year, the participants were upbeat and the focus seemed to be "We've got the consumer back, but how do we keep them back?" One answer was to create an engaging and exciting shopping experience.
Retailers must have been successful because revolving credit is up and consumer confidence is high. Let's take a look at our consumers and their behavior during the 2014 holiday shopping season.
Consumer credit outstanding rose $14.8 billion in December from $13.5 billion in November (see the chart). Nonrevolving credit, which is made up mostly of auto and student loans, rose $9.0 billion. However, the more noteworthy movement is that revolving credit rose a significant $5.8 billion in December from November's decline of $0.9 billion. In my opinion, this increase indicated the consumer was willing to take on debt previously avoided. Revolving credit, composed primarily of credit card loans, showed its strongest growth in eight months (the chart compares month-over-month data).
The Conference Board's survey on current conditions rose significantly to a seven-year high of 112.6 points in January from December's reading of 99.9. The University of Michigan's index rose to 109.3 points in January from 104.8 in December. The Conference Board's current conditions survey is based on the survey participants' view of current economic conditions as it relates to businesses and jobs, while the University of Michigan's survey is based on the individuals' sentiment as it relates to their personal households (see the chart).
The Conference Board's measure of expectations rose moderately to 96.4 points in January from 88.5 in December. The University of Michigan's index rose to 91.0 points in January from December's reading of 86.4. The expectations surveys by both entities are based on the same views of the survey participants as the current conditions surveys. However, the forward-looking expectations time frame differs. The Conference Board is looking six months out, and the University of Michigan is looking one to five years out (see the chart).
It appears, for now, that the consumer is increasingly upbeat, which is vital to the strength of the economy. Several District retail contacts recently reported double-digit growth and record-setting volume in 2014. Casual dining establishments saw an uptick in volume as consumers seem to be trading up from fast-food options.
Although total retail sales fell 0.8 percent in January from 0.9 percent in December, core retail sales—those excluding auto, gas, and building materials—rose 0.2 percent in January from December's decline to 0.1 percent, month over month. Retail sales maintained the same pace of growth for December and January rising 3.3 percent year over year (see the chart).
Overall, the consumption sector looks reasonably vibrant. And as one of my industry contacts said, "Every day gets better." It appears that Chairman Bernanke isn't the only one enjoying his current situation.
By Christine Viets, a Regional Economic Information Network analyst in the Jacksonville Branch of the Atlanta Fed
Southeastern Manufacturing Sees No Shadow
In a January SouthPoint post, I suggested that winter posed problems for manufacturing last year, and after the release of December's lackluster Southeast Purchasing Managers Index (PMI) report, it appeared that 2015 might get off to a slow start as well. Then the really disconcerting news hit: America's favorite groundhog saw its shadow on February 2, predicting six more weeks of winter. Would this event affect southeastern manufacturing going forward? According to the January Southeast PMI report, released on February 6, the answer was a resounding no!
The Atlanta Fed's research department uses the Southeast PMI to track manufacturing activity in the Southeast. Econometric Center at Kennesaw State University produces the survey. It provides an analysis of current market conditions for the manufacturing sector in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The PMI is based on a survey of representatives from manufacturing companies in those states and analyzes trends concerning new orders, production, employment, supplier delivery times, and inventory levels. A reading above 50 indicates that manufacturing activity is expanding, and a reading below 50 indicates that activity is contracting.
After contracting in December for the first and only time in 2014, the Southeast PMI bounced back with vigor in January (see the chart). The overall reading rose 10.0 points over December to 55.6 and saw a healthy rise in most subindexes.
- The new orders subindex rebounded 23.4 points over December, seeing the subindex increase to a solid 57.4 reading.
- The production subindex also saw a significant gain over last month, rising 21.1 points to a 61.1 reading.
- The employment subindex rose 5.3 points over December and remained in expansionary territory for the 16th consecutive month, suggesting that manufacturing payrolls continue to grow.
- The supplier deliveries subindex increased 1.9 points from the previous month to 51.9.
- The finished inventory subindex fell 1.9 points compared with December. The 48.1 reading suggests that inventories may be slightly below optimal levels, and production could ramp up in the near term as a result.
- The commodity prices subindex continued its slide, falling another 5.0 points compared to last month.
Optimism was at healthy levels in January as well. When asked for their production expectations during the next three to six months, 61 percent of survey participants expected production to be higher going forward.
The January report was a nice reversal from the December data and provides a strong start to 2015. Hopefully, the momentum will carry over to the entire year. Although we love Punxsutawney Phil as much as anyone, we hope his weather forecast doesn't hamper manufacturing activity. So far in 2015, there are no shadows in the Southeast.
By Troy Balthrop, a senior Regional Economic Information Network analyst in the Atlanta Fed's Nashville Branch
- Seeking the Slack
- Middle Tennessee Consumer Confidence on the Rise
- Trials and Tribulations in Transportation
- Southeast Manufacturing: Solid as an Oak
- The Fruits of Our Labor
- Tracking Energy’s Trajectory
- Southeast PMI Surges in February
- Tiny Bubbles in Alabama
- Through the Eyes of a Big Fan
- Southeastern Manufacturing Sees No Shadow
- May 2015
- April 2015
- March 2015
- February 2015
- January 2015
- December 2014
- November 2014
- October 2014
- September 2014
- August 2014
- Banks and banking
- Beige Book
- Business Cycles
- Commodity Prices
- Consumer Savings
- Data Releases
- Disaster recovery
- Economic conditions
- Economic Growth and Development
- Economic Indicators
- Fiscal Policy
- Gulf Coast
- Health Care
- Holiday Sales
- Labor Markets
- Local Economic Analysis and Research Network (LEARN)
- Monetary Policy
- Natural Disasters
- New Orleans
- Oil Spill
- Real Estate
- Sales Tax