SouthPoint

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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.


11/20/2014


Music City Is Playing Your Song

Nashville has long been synonymous with country music, and the local economy is closely tied to the music industry. It's not unusual to see a country music star dining in a restaurant or showing up at a local music club for a jam session. In short, music looms large over many aspects of life and culture here. But you might ask, what exactly is the music industry's economic impact on Nashville? Good question! Let's explore.

Music touches several sectors of the Nashville economy. Banking, construction, and hospitality all benefit from the music industry. The Nashville Chamber of Commerce put together a thorough study on the music industry's economic impact. The study revealed that Nashville stands toe to toe with—and in many ways surpasses—New York and Los Angeles for having a fully self-reliant music industry, which in layman's terms means you can write, record, produce, promote, finance, and distribute music without ever leaving the city. Of course, music starts with musicians, singers, and songwriters, but today's music business requires specialized talents that go beyond the stage. Creative, technical, and managerial skills are abundant in the Nashville metropolitan statistical area (MSA). The chamber's study found that relative to Nashville's size, the amount of talent in the music industry at all levels of the process is extraordinary.

The local music industry employs a vast array of people across a correspondingly vast array of sectors. In 2012, according to the chamber's study, the Nashville MSA employed almost 3,000 artists and musicians with an average annual pay of more than $85,000. Music publishing employed almost 1,500 people, with an average annual pay of nearly $75,000. The list goes on and on, including musical instrument manufacturing, musical supply stores, record stores, record production, radio networks, and recording studios. It's almost impossible to tell where the employment influence of the music industry begins and ends. Many jobs are directly related to music, but others are indirectly related and not classified in a way that shows up in a study of employment in the music industry. All in all, the chamber's study indicated that the density of activity in Nashville's music industry is some 10 times greater than New York or Los Angeles, and even greater than cities such as Atlanta, Austin, and New Orleans. Core music industry employment per 1,000 people exceeds all other U.S. cities by a large margin.

The chamber of commerce's report also found that some 56,500 people's employment was tied to the music industry, resulting in labor income of over $3.2 billion and contributing almost $5.5 billion to the local economy, with a total output of almost $10 billion, a large portion of the Nashville MSA's $85 billion gross domestic product.

But what about other areas of the economy that benefit from the music industry's contributions? According to a July 2013 article from the Atlantic CityLab, industries such health care, transportation, and food service benefit greatly. The article pointed out that work in Nashville's full-service restaurants has grown 10 percent since 2009, and the entertainment industry can be credited for a good bit of that growth. The article also pointed out the multiplier effect the music industry has on local employment. For every 10 jobs created in the music industry, another 52 positions are created in the broader economy.

Needless to say, the music industry is important to the Nashville region. Whether it's the entertainment talent, the history, or the culture, music thrives here. So put on your cowboy boots, your cowboy hat, and blue jeans. Nothing says "Welcome to Nashville" more. We are not called Music City USA for nothing!

By Troy Balthrop, a Regional Economic Information Network analyst in the Atlanta Fed's Nashville Branch

November 20, 2014 in Employment, Entertainment, Jobs, Nashville, Tennessee | Permalink | Comments (0) | TrackBack (0)

11/13/2014


Signs Point Up for Regional Manufacturing

Have you ever noticed all the signs in the world around you? They are everywhere. Many of them can prompt some deep thought. For instance, I was recently driving to work one morning, and three deer ran out in the road in front of me. Luckily, I didn't hit them, but it made me wonder: Who decides where to put deer crossing signs? How do they know a deer wants to cross the road right there?

Speaking of signs worth your attention, the signs for southeastern manufacturing are pointing up, according to the latest Southeast Purchasing Managers Index (PMI), which was released on November 6. The report suggests that things look pretty strong, and digging into the report, one could conclude that things are even stronger than they initially appear.

The Atlanta Fed's research department uses the Southeast PMI (produced by the Econometric Center at Kennesaw State University) to track manufacturing activity in the Southeast. The survey analyzes current conditions in the manufacturing sector in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The Southeast PMI is based on a survey of representatives from manufacturing companies in those states and analyzes trends in 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 PMI increased to 56.5 in October, which was a 1.5 point increase over September (see the chart). Some notable highlights:

  • The new orders subindex remained especially strong in October, registering 64.4, which is a 3.4 point increase over September's 61.0. New orders have averaged a solid 60.7 for the year.
  • The production subindex increased significantly to 67.3 during October, 8.3 points higher than September's reading of 59.0.
  • The employment subindex fell 2.2 points from the previous month. October's reading of 54.8 still indicates that manufacturing payrolls are increasing.
  • The supplier deliveries subindex rose 3.8 points during October, indicating that delivery of inputs is slowing as a result of high demand.
  • The finished inventories subindex fell 5.7 points compared with September and sits at 41.3. The fall in finished inventories suggests that inventory levels are lower than the previous month and could lead to higher orders in the near future.
  • The commodity prices subindex fell to 51.0, a 2.0 point decrease from September.
Southeast Purchasing Managers Index

When asked for their production expectations over the next three to six months, only 21 percent of survey participants expect production to be higher, down from 50 percent in September. According to the survey, 19 percent of survey respondents expect production to be lower than their current production levels. Those responses imply that 60 percent expect production to stay at current levels.

So to recap: The PMI indicates that regional manufacturing has seen strong new orders and production, employments levels are expanding, demand for inputs could be slowing deliveries, inventory levels are falling, commodity prices are essentially flat, and most purchasing managers are expecting to remain at their current levels of production. Although the low production expectations for the next three to six months prevent it from being a perfect set of conditions, they collectively indicate strong manufacturing activity in the near future. Just as with the deer crossing signs, I'll be paying close attention.

By Troy Balthrop, a Regional Economic Information Network analyst in the Atlanta Fed's Nashville Branch

November 13, 2014 in Economic conditions, Employment, Inventories, Manufacturing, Prices, Productivity, Southeast | Permalink | Comments (0) | TrackBack (0)

11/07/2014


South Florida Maintains Momentum

In a SouthPoint post in August, I discussed improving economic conditions in South Florida. This momentum is continuing into the last quarter of 2014, with business activity generally strong and some new developments in business investment.

From mid-September to the end of October, business contacts for the Miami Branch of the Atlanta Fed continued to indicate improving business sentiment in the region. Economic activity and overall demand reflect steady growth. One exception to this steadily improving performance is the real estate market, which remains a very active sector in South Florida, with prices continuing to increase.

Employment and labor markets
Business contacts continued to report a concern with a skill-set gap between job seekers and available job opportunities. Contacts across several sectors report difficulty finding skilled labor for specialized positions in technology, mathematics, engineering, management, and lending. In a few sectors, the labor market was reported as tightening.

Contacts in the hospitality industry discussed how the tourism sector's expansion has resulted in job growth. The application of technology has reduced the need for some labor resources. However, creating "experiences" for travelers still requires a human touch, thus the need for additional workers as the sector expands and new venues come online. The part-time to full-time employee ratio has remained stable for some time in this sector, with contract workers being used for specific projects. (Speaking of tourism, industry contacts continue to report construction of new hotels, sports venues, and other attractions, in addition to the renovation of restaurants, hotels, and convention centers.)

Costs, prices, and wages
Business contacts reported some increases in costs, primarily in rent, total compensation, and commodities. Increases in construction costs were mainly associated with increasing land and labor costs. Rising commodity prices were affecting the ability to increase prices and improve profit margins. Contacts reported that—with the exception of the real estate and food services sectors—passing through price increases has met with little success, although many contacts have attempted to raise prices or are considering doing so in the near future.

The commercial real estate rental market remains quite active. Real estate professionals are reporting that as a result of a shortage of industrial space, landlords are able to increase rents, spurring an increase in average asking rents.

Contacts continue to report increasing wage pressures for specific skilled labor. Rising health care costs have been described as a significant concern that is driving total compensation costs up. The reports were mixed as to the percentage of increases, although most said increases ranged between 10 percent and 20 percent. Some contacts are absorbing these costs rather than increasing wages, and others have passed on some or all of the cost to the employee.

Availability of credit and investment
Banking sector contacts all reported being well capitalized, though small businesses noted continued credit constraint. Contacts in regional banking expect the combination of traditional and nontraditional structures (for example, supply-chain financing and accounts receivable purchases) to gain momentum through the end of the year and into 2015.

The number of reports of investments and capital expenditures increased. South Florida real estate companies indicated little slowdown in foreign capital moving into the market. The prevailing perspective is that the United States still offers a strong safe haven.

Overall, South Florida business contacts continue to report positive activity, and an optimistic outlook prevails in the near term.

By Marycela Diaz-Unzalu, a senior Regional Economic Information Network analyst at the Atlanta Fed's Miami Branch

November 7, 2014 in Employment, Florida, Labor Markets, Real Estate | Permalink | Comments (0) | TrackBack (0)

11/04/2014


Heading into Fall, Florida's Recovery Continues

In an August SouthPoint post about economic conditions in north and central Florida, we stated that the sentiment of our contacts during the summer had been the most upbeat since before the recession. Since then, the Jacksonville REIN team has met with more than 50 business contacts, and it was very clear that the optimism was ongoing.

Contacts were upbeat as revenues and volumes increased. Demand for residential purchase mortgages met expectations, and residential lot development had made a comeback since the recession. Activity in multifamily real estate was robust, commercial loan activity improved, and office space absorption increased.

Employment and labor markets
Employment levels remained relatively flat for most, but some larger firms added to headcount. Complaints about difficult-to-fill positions persisted, though there was little evidence of contacts aggressively raising pay to attract talent. For some financial institutions, the increased availability of full-time positions in the marketplace has created turnover of part-time staff such as tellers. In addition to the usual difficult-to-fill positions (information technology, accounting, and compliance and risk), we heard stories of challenges filling lower level, low-skill positions in industries such as hospitality. In the Space Coast region, there were reports of overall shortages of workers.

Costs, wages, and prices
Most contacts indicated that nonlabor inputs have increased at about the rate of inflation. However, commodities like resins, plastics, and aluminum are expected to remain fairly flat for the foreseeable future. Construction costs in our area have reportedly stabilized, and fuel prices have lowered considerably. Food costs, particularly proteins, are up compared with last year.

Anecdotes about 2015 health care premiums were mixed, as increases ranged from less than 1 percent to as high as 20 percent. Many companies indicated that they plan to change benefit structures, raise deductibles, alter prescription plans, and eliminate dependent coverage (and so on) in an effort to avoid significantly increasing the proportion that employees pay as a result of worries about talent acquisition and retention. Others are moving ahead with shifting some measure of any increases to employees.

Most contacts reported moderate wage pressures for technically skilled positions. Some reported increased starting salaries for some lower-level jobs such as call center positions, and some are forced to offer more to attract those with internet or digital media skills. Most contacts continued to budget merit increases in the range of 2.5 to 3 percent.

Availability of credit and investment
Access to capital and availability of credit continued to be a nonissue for the majority of our contacts, but some small organizations continued to struggle for funds. Banking contacts reported strong loan demand for purchase mortgages in addition to new construction loans, refinances, home improvement loans, consumer loans, and increases in commercial loans. Reports of capital expenditures including major port expansions, health care facility construction projects, and merger and acquisition activity were widespread across the region.

Business outlook
Some contacts mentioned downside risks to the outlook, including the outcome of today's election, increased government regulations, and—most recently—worries about weakness internationally and the resulting market volatility that crept up in mid-October. Generally, however, contacts reported an expectation for higher growth in the short and medium term.

Tell us: What's your outlook for growth for the rest of 2014 and into the next year?

By Chris Oakley, regional executive, and Sarah Arteaga, REIN director, both at the Atlanta Fed's Jacksonville Branch

November 4, 2014 in Economic conditions, Employment, Labor Markets, Outlook, Prices, Recovery, Southeast | Permalink | Comments (0) | TrackBack (0)

10/30/2014


Regional Housing Sales, Construction Slowing

The Atlanta Fed conducts a monthly poll of regional residential brokers and homebuilders to track emerging trends in housing markets. The latest results, which reflect activity in September 2014, suggest continued slow growth in sales and construction activity.

Many residential brokers and builders indicated that home sales were flat to slightly up from the year-earlier level. The report from brokers and builders on buyer traffic was mixed. Those who indicated a decline in traffic suggested that seasonal factors and a decline in buyer confidence were behind the decline. A growing share of residential brokers and builders reported that home inventory levels had increased slightly from the year-earlier level. Comments suggested that well-priced homes are moving quickly, but that many sellers are pricing their homes fairly optimistically, causing inventory to build until prices are adjusted.

Many builders reported that construction activity had increased from the year-earlier level. The drop depicted in the chart below reflects the fact that a growing share of builders reported construction activity as flat to down slightly.

September 2014 Southeast Construction Activity

Most builders indicated that they continue to experience upward pressure on materials prices. Builders’ reports ranged widely when we asked them to specify the materials experiencing the greatest pricing pressure, and their responses included concrete, drywall/sheetrock, and lumber. These reports are fairly consistent with year-over-year changes in the Engineering News Record’s cost indices: on a year-earlier basis, concrete prices are up 3–4 percent, drywall/sheetrock products are up 10 percent, and lumber products are up 7–9 percent.

Builders also continued to report upward pressure on labor costs and that they are having a tougher time filling positions compared to a year earlier. In addition to asking about builders’ difficulty filling positions, we posed a special question about labor shortages. Two-thirds of builders indicated that they were experiencing a labor shortage. Reports about the trades most affected by these shortages were also fairly wide-ranging, but there seemed to be a fair amount of consensus around the idea that framers, masons, carpenters, and drywall installers were the hardest tradespeople to come by on job sites. These results are fairly consistent with report released by the National Association of Home Builders earlier this year.

To explore these results in more detail, or to view other results that were not discussed in this post, please see our Construction and Real Estate Survey results.

Note: The latest poll results, which reflect activity in September 2014, are based on responses from 40 residential brokers and 25 homebuilders and were collected October 6–15. Please sign up if you would like to participate in this poll.

Photo of Jessica DillBy Jessica Dill, senior economic research analyst in the Atlanta Fed's research department


October 30, 2014 in Construction, Economic conditions, Economic Indicators, Prices, Real Estate, Southeast | Permalink | Comments (0) | TrackBack (0)

10/28/2014


Southeastern Labor Markets Give Off Some Positive Signs

Following an encouraging national employment report released on October 3, last week's release of September 2014 state-level labor market data from the U.S. Bureau of Labor Statistics likewise showed some positive labor market signs. The unemployment rate fell in 31 states, was unchanged from the previous month in 11 states, and rose in eight states. This was the smallest number of states to see a month-over-month increase in unemployment since April. The September report also revealed that employers added net jobs in 39 states and cut jobs in 10 and that payrolls were unchanged in one state. So how did the Sixth District states fare?

Before we dive into the numbers, I'd like to share a disclaimer that might make sense if you've read my posts about state-level employment data during the last few months: churn and seemingly unintuitive results are to be expected with high-frequency economic data, labor market data in particular. Read on to see what I mean.

Unemployment rates
The aggregate district unemployment rate in September was 6.8 percent, a 0.1 percentage point decline from the previous month, though nearly a full percentage point above the national rate of 5.9 percent (see the chart).

The unemployment rate declined in nearly all states, and Georgia and Tennessee bucked a four-month trend of upward movement, falling to 7.9 and 7.3 percent, respectively. Also, Alabama had a 0.3 percentage point drop in its unemployment rate, which fell to 6.6 percent in September—it's lowest rate in seven months. Florida's rate fell 0.2 percentage point to 6.1 percent, the lowest it's been in over six years.

On the other hand, Louisiana's unemployment rate increased for the fifth consecutive month to 6.0 percent, which isn't necessarily a bad thing in the short run, since the state added jobs (I'll get to that). By definition, Louisiana added more people looking for work than the number of people who found work; hence the increase in unemployment. (This result is what I meant by "seemingly unintuitive.")

In addition, though, the decline in Georgia's unemployment rate may be considered an encouraging sign. The state had the highest unemployment rate in the nation for the second month in a row, followed by another Sixth District state: Mississippi, with 7.7 percent.

SE-Uneployment-States

Payrolls
Employers in most Sixth District states added to payrolls in September: 39,900 payrolls were added on net (see the chart). The sectors with payroll additions varied state by state, though leisure and hospitality gains were relatively widespread and sizable across Sixth District states, adding 13,200 net jobs. The trade, transportation, and utilities sector contributed the most net jobs with 14,600. However, the majority of these new payrolls came from Florida, and losses in the sector occurred in three Sixth District states: Tennessee (down 1,200), Louisiana (down 600), and Mississippi (down 200). Below, some state-by-state payroll and key sector facts:

  • Alabama, which contributed 11,400 net jobs, hadn't seen this many jobs added in one month in about 20 years. Leisure and hospitality (up 5,000) and professional and business services (up 2,600) sectors were the top contributors. The only sector that subtracted jobs in Alabama was financial activities (down 200).
  • Florida added 13,400 jobs on net in September, mostly from the trade, transportation, and utilities sector (up 11,300), with a large number of them (8,600) from retail trade alone. Payrolls fell in the financial activities (down 3,400), education and health services (down 2,600), and professional and business services (down 800) sectors.
  • After adding nearly 20,000 jobs for two months in a row, Georgia subtracted 2,800 net payrolls from the September aggregate figure. The biggest losses came from the goods-producing sector (down 3,500), with 2,900 manufacturing jobs lost and the professional and business services sector (down 3,300). Georgia's payroll gains occurred in trade, transportation, and utilities (up 3,900), education and health services (up 3,000), and financial activities (up 200).
  • Louisiana added 3,600 payrolls on net, most of which came from leisure and hospitality (up 2,000), professional and business services (up 1,300), and the other services (up 1,200) sectors. Losses occurred in the trade, transportation, and utilities (down 600), government (down 600), and education and health services (down 300) sectors.
  • Employers in Mississippi added 6,000 net new payrolls in September, the state's largest net gain in nearly a year, mostly boosted by the professional and business services (up 2,700), education and health services (up 2,200), and leisure and hospitality (up 1,300) sectors. The biggest payroll losses occurred in the government sector (down 2,700).
  • Tennessee employers increased payrolls by 7,200 on net in September. The largest increases occurred in the education and health services (up 3,100), government (up 2,100), and goods-producing (up 2,000) sectors. Payrolls were subtracted in the trade, transportation, and utilities (down 1,200) and other services (down 1,200) sectors.

Contributions-to-Change

Overall, Sixth District states' labor markets fared well in September (though I plan to keep my eyes on Louisiana's rising unemployment trend; watch this space for further analysis).

Hopefully we'll continue to see signs of gathering strength when October's report is released on November 21.

By Rebekah Durham, economic policy analysis specialist in the New Orleans Branch of the Atlanta Fed

October 28, 2014 | Permalink | Comments (0) | TrackBack (0)

10/27/2014


Southeastern Transportation Continues Rolling

Members of the Atlanta Fed’s Trade and Transportation Advisory Council met in Atlanta on October 8 to discuss the latest updates on and insights into the industry. Most council members reported expansion continuing into the fourth quarter. Year over year, demand was greater across the majority of industries represented. In rail, shipments of frac sand, which is used in the hydraulic-fracturing process (commonly referred to as fracking) to produce petroleum products such as oil, natural gas and natural gas liquids from rock, and crude oil were up substantially, and intermodal volumes were steadily rising as a result of trucking capacity constraints. Ocean shippers reported a shift in the modes of movement of commodities, which were historically shipped in bulk but are now shipped in containers, causing a shortage of containers for traditional use. Demand in the flatbed trucking market was very strong, with shipments of drywall and bulk cement increasing. Going into the holidays, logistics firms anticipate e-commerce volume to pick up substantially by mid-November.

Employment
Reports on current employment levels this year versus last year at this time were mixed. More than half anticipate just slightly higher staffing levels this time next year. Truck driver turnover for the overall industry is quite high. For new drivers, turnover within the first 90 days of employment is very high. Trucking firms reported that only a very small percentage of applicants are hired, as many do not meet driver requirements.

Costs, wages, and prices
Most reported moderate increases in nonlabor input costs. Wages were reported as modestly increasing across most transportation industries with the exception of trucking, where wages continued to increase at a clip of 6 percent to 7 percent annually. Reports on increases in health care premiums for 2015 varied, ranging from less than 1 percent up to 20 percent. Some companies reported anticipated changes to plan structures to mitigate expenses, and others plan to share rate increases with employees. Regarding pricing power, a few reported an ability to raise prices, but others reported significant pushback by clients. Trucking firms plan to continue raising rates amid rising demand, reduced capacity, and continued increases in driver pay.

International trade issues
According to council members, the net impact of the recent strengthening of the dollar had been minimal on international activity when this meeting was held. A slowing trend in world trade was cited by one council member as the biggest factor affecting both imports and exports.

Overall, the sentiment of this group has improved since the last meeting in April, and all council members reported a higher outlook for short- and medium-term growth, with greater confidence in their forecasts. Council members were asked to cite the single most challenging issue facing their industry today. Trucking firms indicated that the lack of truck drivers and increased industry regulations will continue to cause diminished capacity for the foreseeable future. In maritime trade, ongoing ocean carrier consolidations will impact all U.S. container ports and there will be both winners and losers as a result of the carriers’ decisions.

What impact will these challenges have on commerce? The council meets again in April 2015. We’ll watch as conditions play out, and we’ll relay the information here.

By Sarah Arteaga, a Regional Economic Information Network director in the Atlanta Fed's Jacksonville Branch

October 27, 2014 in Economic Indicators, Shipping, Southeast, Trade, Transportation | Permalink | Comments (0) | TrackBack (0)

10/20/2014


Southeastern Tourism Continues Trekking to Health

Members of the Federal Reserve Bank of Atlanta's Travel and Tourism Advisory Council reported continued strength in this important sector at their October 9 meeting. They also expressed optimism regarding future prospects for regional tourism activity.

Members noted that most areas in the Southeast registered increases in hotel occupancy, daily rates, and state park visits. International travel continued to boost the region's overall tourism numbers. Council members continue to report an increase in international tourist activity in 2014 over 2013, primarily from Latin America and Europe, and they added that foreign visitors help drive retail sales in tourist destinations.

Once again, the council discussed capital expenditure projects across the region. Some areas continue to report construction activity in new hotels, sports venues, and other attractions, in addition to renovations of restaurants, hotels, and convention centers. Locations with recently completed construction projects are reporting additional visitors who wish to experience the newly opened venues.

Council members also discussed how expansion in the tourism sector has resulted in job growth. As in other sectors, application of technology has reduced the need for some labor resources. However, council members said that the need to create “experiences” for travelers requires a human touch, resulting in an additional need for workers as the sector expands and new venues open.

Some members expressed concerns about the challenges of finding skilled labor for specialized positions in technology, mathematics, engineering, and management, with some accompanying wage pressure in these specific positions. The part-time to full-time employee has remained stable for some time, with contract workers being used for specific projects.

Council members discussed concerns regarding economic disparity among potential travelers. This disparity is causing high-income individuals to travel more and spend more, and some middle-class people are unable to afford leisure travel. Ideally, members said, traveling and visiting family entertainment venues would be increasingly affordable to middle-class consumers.

Some council members stated that new businesses are emerging, citing rising levels of restaurant franchising. However, even though consumers are dining out, they said that the restaurant dining has not yet hit prerecession levels. In general, travel and tourism looks promising in the near term. With continued new developments in the sector, hopefully even more people will head south for their getaways.

By Marycela Diaz-Unzalu, a senior Regional Economic Information Network analyst at the Atlanta Fed’s Miami Branch

October 20, 2014 | Permalink | Comments (0) | TrackBack (0)

10/16/2014


Southeastern Manufacturing Continues to Expand

The return of fall has not cooled down manufacturing in the Southeast. The Southeast Purchasing Managers Index (PMI), which was released October 5, indicated expansion in the manufacturing sector for the ninth consecutive month.

The Atlanta Fed's research department uses the Southeast PMI to track manufacturing activity in the Southeast. The 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 points indicates that manufacturing activity is expanding, and a reading below 50 points indicates that activity is contracting.

The Southeast PMI fell slightly to 55.0 points in September. The index was only 1.7 points lower than August and still solidly above the 50 threshold for expansion (see the chart). The new orders subindex registered a nice increase, and the employment subindex rose, but all other subindexes fell during the month.

  • New orders: The new orders subindex increased 4.5 points over August's levels and has now climbed 15.7 points during the last two months.
  • Production: The production subindex decreased. September's 59.0 reading was 1.2 points below August but was still well into expansionary territory.
  • Employment: The employment subindex inched up 0.5 points compared with the previous month. The employment subindex has now indicated expansion for 12 consecutive months.
  • Supply deliveries: The supplier deliveries subindex declined 3.6 points during September, indicating that manufacturers are receiving their inputs slightly more quickly.
  • Finished inventory: The finished inventories subindex decreased 8.6 points compared with August. The fall completely reversed the previous month's gain of 8.4 points. The subindex is now below 50, implying that purchasing managers are not as concerned about a buildup of inventory levels.
  • Commodity prices: The subindex measuring input price pressures moved down to 53.0, a 5.3 point drop from the previous month.

Se-purchasing-manager-index

Optimism among purchasing managers continued to rise during September. When asked for their production expectation over the next three to six months, 50 percent stated that they expect production to be higher, an increase from 44 percent in August. Only 18 percent of survey respondents expect their production to be lower.

The rise in new orders and strong production numbers bode well for manufacturing heading into the fourth quarter. The Southeast PMI has averaged a 56.6 reading so far this year. Conversely, the national PMI (produced by the Institute for Supply Management) has averaged 55.2. (I should note that the Southeast PMI is not a subset of the national index.) We'll be on the lookout for any changes in activity. After all, it's fall—the season of change.

By Troy Balthrop, a Regional Economic Information Network analyst in the Atlanta Fed’s Nashville Branch

October 16, 2014 in Economic conditions, Economic Growth and Development, Manufacturing, Southeast | Permalink | Comments (0) | TrackBack (0)

10/14/2014


In the Volunteer State, Economic Growth Anticipated

The Center for Business and Economic Research (CBER) at the University of Tennessee recently published its fall 2014 economic outlook for Tennessee. The report painted a moderately positive economic picture for the Volunteer State, lining up well with what we have been hearing from our business contacts, highlighted in a recent SouthPoint post.

CBER conducts research on national and state economic trends. Report findings are used not only by the University of Tennessee, but also by state government and other public and private entities. The center—headed by director William F. Fox and associate director Matthew Murray—has provided an economic report to the governor every year since 1975, and these reports serve as the official forecast for the state.

The fall report highlighted a rebound in state employment and noted slow but steady gains during the first half of 2014. Nonfarm employment grew by 1.4 percent in the first quarter and 2.6 percent in the second. To compare, the national employment growth rate was 2.2 percent in the second quarter. Although Tennessee's unemployment rate has come down during 2014, the progress has been somewhat uneven. During the first quarter, the unemployment fell to 6.9 percent, and then it fell further to 6.4 percent in the following quarter. Recently, however, the rate increased to 7.4 percent in August. The unemployment rate is expected to inch downward during the fourth quarter and average 7.0 percent for 2014 and 2015. That said, the state's unemployment rate has remained even with or above the national rate since March 2012.

Looking down the road
Employment gains this year and next should be broad-based across most sectors of the Tennessee economy, with the exception of the information and government sector, which is projected to shed jobs this year. The professional and business services sector is expected to lead employment gains, but it could experience slowing growth in 2015. The transportation and utilities, education, and health care services sectors are expected to see stronger growth in 2015 compared with this year, and manufacturing employment growth is expected to slow to 0.9 percent in 2014 and 0.5 percent in 2015. Manufacturing employment in the state remains below prerecession levels although manufacturing output has surpassed prerecession levels, indicating productivity gains in the sector.

Nominal personal income is on pace to grow by 3.5 percent in 2014, well ahead of the 2.1 percent mark seen in 2013. Income growth is expected to accelerate to 4.4 percent in 2015. Tennessee's personal income grew faster than that of the nation in 2013, but it is expected to be slightly lower than the national rate in 2014 and 2015.

New investments on the horizon
Tennessee has recently received several welcome developments on the investment front. Volkswagen announced plans to add a midsize SUV to its manufacturing plant in Chattanooga, resulting in a $600 million expansion and an additional 2,000 jobs. The Maryland-based apparel company Under Armour plans to build a distribution facility in Mount Juliet. The facility will create 1,500 new jobs and represents a $100 million investment.

Overall, it appears Tennessee will hold its own, economically speaking, and the national economy will continue to rebound. If that modestly optimistic outlook doesn't sound like much to get excited about, it nevertheless represents an improvement over recent years.

By Troy Balthrop, a senior Regional Economic Information Network analyst in the Atlanta Fed's Nashville Branch

October 14, 2014 | Permalink | Comments (0) | TrackBack (0)

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