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04/29/2010
Regional poultry industry and exports
The poultry industry is the region's most important farm-producing sector. This $10 billion cash-producing sector is also the region's top farm exporter, one of the few national industries producing a trade surplus (see EconSouth Q4 2009).
According to the National Chicken Council, U.S. exports of poultry products in 2009 accounted for 18.8 percent of production. The economic impact on the poultry industry on District states is significant, according to an American Meat Institute (AMI) study. The AMI report estimated that in 2009 incomes paid by poultry companies in the region reached $8.2 billion, with the industry supporting nearly 49,000 jobs, mainly in Georgia, Alabama, and Mississippi.
Although the poultry industry this year has been boosted by improving domestic demand and lower feed costs, risks to the outlook exist, namely trade relationships with Russia and China—the nation's top poultry export markets. Chart 1 shows that in recent years, U.S. poultry export values were led by strong demand from Russia and China, countries that from 2006 to 2008 nearly doubled their purchases to $4.2 billion. In 2009 and early 2010, however, exports to China and Russia plunged dramatically as those countries boosted domestic production and placed limits on U.S. poultry imports.
Russia had been the top overseas buyer of U.S. chicken, accounting in 2009 for about 20 percent of U.S. broiler exports. In 2009, U.S. poultry shipments to mainland China accounted for about 18 percent of overall U.S. broiler exports. About half of the chicken parts sold to China are wings and feet, which are worth only a few cents a pound in the United States. In contrast, these products in China fetch more than 60 cents a pound, a price that no other foreign market comes close to matching.
Recently, the U.S. Bureau of the Census reported that through February 2010 total U.S. broiler exports in early 2010 were down 14 percent from the first two months of 2009. A large portion of the decrease was the result of falling shipments to Russia and China.
The decline in overall poultry exports in 2010 was not offset by larger U.S. poultry shipments to Hong Kong (a 335 percent year-over-year increase) and Canada (a 21 percent year-over-year increase).
Although poultry exports are a small piece of U.S. international trade, the industry supported by this trade and the resulting wages and revenue are important to the region.
By Gustavo Uceda, a senior economic analyst in the Atlanta Fed's research department
April 29, 2010 in Agriculture, Exports, Poultry | Permalink
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04/21/2010
An inventory story: Manufacturers rebuild inventories
Keeping in line with chipper data releases in the manufacturing sector, the U.S. Census Bureau reported last week that manufacturing inventories, as well as overall business inventories, grew in February after many months of decline. (Other recent good news for the manufacturing sector can be found in the March IP report.) In February, manufacturing inventories were up from $495.7 million to $498.3 million, or 0.5%, for the United States.
For the previous several recessions, manufacturing inventories bottomed out just after the National Bureau of Economic Research (NBER) declared the end of the recession, with small monthly gains coming early in the recovery stage. An increase in manufacturing inventories for February suggests that suppliers may be ready to start restocking shelves and hints at a brighter overall economic picture.
The National Institute for Supply Management's Purchasing Manager's Index (PMI) provides some evidence of manufacturing inventory growth in March. Last month, the national PMI reflected growth in the inventories index after 46 months of liquidation.
Regional indicators also pointed to increases in manufacturing inventories for February. The Kennesaw State University PMI, which reflects manufacturing activity in the Southeast, revealed a sharp jump of 18 index points in the inventory component, putting it into the "expansion" range of the index. Though February's 18 point spike in the Southeast inventory component was dampened slightly in March with a 1.4 index point dip, the index still hovers around the benchmark for growth in inventories and remains above the average trend of the previous recession. This goes hand-in-hand with an increasing number of manufacturers across the Southeast who are increasingly more optimistic in their production outlooks.
The New York Fed's Empire State Manufacturing Survey, a leading manufacturing indicator, has also reflected gains in manufacturer's inventory levels. In March, the inventory component turned positive for the first time in more than a year. The trend is growing stronger in April: Last week's Empire State Manufacturing Survey, reflecting April data, shows the inventory component at a historical high.
The next U.S. Census Bureau release reflecting March inventories is due on May 14, while we'll get an update on Southeastern inventories for April from the Kennesaw State PMI release, expected May 5.
By Mark Carter, an economic analyst in the Atlanta Fed's research department
April 21, 2010 in Manufacturing | Permalink
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04/14/2010
Measuring regional economic performance
I spent the first two days of this week in Washington, D.C., at the 2010 National Association for Business Economics (NABE) Professional Development Seminar. Now in its seventh year, the NABE Professional Development Seminar (PDS) is a program designed to strengthen participants' knowledge of economic statistics and analytical techniques. I've been honored to present the Atlanta Fed's approach to regional economic analysis at several PDS events over the years.
This year I had the privilege of presenting with Dr. Charles Stiendel, a senior vice president at the New York Fed, and Dr. Keith Phillips, a senior economist and policy advisor at the Dallas Fed.
Dr. Stiendel discussed the Beige Book process in detail—a very well-timed presentation since today is when the Fed releases the latest report. He pointed out that while the Beige Book is driven by anecdotal reports from contacts in the business and labor community, one study has found that a quantitative classification of the Beige Book can be used to enhance near-term GDP forecasts. The Dallas Fed published a study in 1998 by Balke and Petersen that found that both in-sample and out-sample, the quantitative Beige Book indices, do have significant predictive content for current and next-quarter real GDP growth. Furthermore, the Beige Book has information about current-quarter real GDP growth not present in other indicators such as the Blue Chip Consensus Forecast or time series models that use real-time data.
The Atlanta Fed published a study in January 2003 by Ginther and Zavodny that examined whether the descriptive content of the Beige Book affects asset prices. The results indicate that more positive Beige Book reports on economic growth are associated with increases in interest rates, particularly long-term rates, even after controlling for other macroeconomic data releases. Stronger Beige Book reports are positively associated with changes in equity prices during expansions but negatively during recessions.
In his presentation, Dr. Philips presented some of the novel methods the Dallas Fed uses in measuring economic performance in Texas. Among them are several measures of state and metro area business cycles. In 2004, the Dallas Fed published Phillips' work on a New Monthly Index of the Texas Business Cycle and followed that up in 2005 by extending coverage to include major metro areas in the state.
In 2007, we at the Atlanta Fed developed our own measure of regional economic activity called the "D6 Factor." The paper that developed the D6 factor by Silos and Vilan outlines and estimates a model of the Sixth Federal Reserve District economy that provides a single economic indicator. The model assumes that the region's economic activity—measured by a large set of time series of employment, construction, earnings, and sales tax revenues—is driven by an unobserved common factor. The model incorporates disaggregated information for each state into a large model to derive a common component. Having a single economic indicator for the region allows for simpler and faster interpretation of various (sometimes contradictory) economic signals and makes comparisons with the nation's and other region's economies easier.
Whether it's the Beige Book or data-driven measures of economic activity, the Fed's regional banks provide a wealth of information to gauge regional economic performance.
By Michael Chriszt, assistant vice president in the Atlanta Fed's research department
April 14, 2010 in Beige Book, Forecasting | Permalink
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04/08/2010
LEARNing, Part II
Last week marked the second gathering of the Atlanta Fed's Local Economic Analysis and Research Network (LEARN). We discussed three of the presentations in our previous post. This time around we'll discuss the other lectures from our conference.
Mississippi's outlook was presented by state economist and assistant commissioner of institutional research for the Mississippi State Institutions of Higher Learning, Dr. Philip Pepper. He noted that although the state felt the brunt of the recession later than most states in the region, its recovery will closely track that of the nation as a whole. That said, Dr. Pepper highlighted the fact that average growth during economic expansions has decelerated over time, and that he felt that growth in the United States and Mississippi will be below the long-term average for the foreseeable future. Job growth in particular will be anemic in Mississippi, he reported, and state revenue growth will be slow coming out of the recession as consumers remained cautious.
Dr. Dek Terrell from Louisiana State University's (LSU) Division of Economic Development and Forecasting noted that Louisiana also was a latecomer to the recession and has not suffered as much as other Southeastern states. Job losses began in the spring of 2009 but have mounted since. The inflow of federal dollars and rebuilding from Hurricane Katrina helped stem the recession's tide for a while, and the state's energy sector held up well, mainly because of industrial construction related to the petrochemical industry.
Also from LSU, Dr. David Dismukes, associate director and professor at the Center for Energy Studies, shared with conference participants how the expansion of the natural gas sector has benefited Louisiana's economy. The discovery and extraction of new gas resources have been the result of the application of new technologies, Dr. Dismukes said. A total of $2.4 billion in new business sales in Louisiana in 2008 were created by Haynesville Shale activity, resulting in approximately $3.9 billion in additional household earnings (much of this from lease and royalty payments) and 32,742 jobs.
Georgia's outlook was not as rosy, according to Dr. Jeffrey Humphreys, director of the Simon S. Selig, Jr. Center for Economic Growth at the University of Georgia. He noted that Georgia will continue to suffer from its heavy exposure to the real estate downturn. The economy is geared toward new residential and nonresidential development. Going into this recession, Georgia had an outsized construction industry and a huge supply of residential and nonresidential properties and a high concentration of manufacturing industries closely allied to construction. The overdependence on development meant the financial crisis did much more damage to Georgia's banks than to the nation's. Dr. Humphreys concluded that Georgia's economy will underperform the national economy until real estate and construction stabilize, sometime in 2011.
Presentations from the LEARN conference can be found on our Web site.
By Michael Chriszt, an assistant vice president in the Atlanta Fed's research departmentApril 8, 2010 in Alabama, Florida, Tennessee | Permalink
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