The Southeast PMI rings in 2012
Kennesaw State University's Purchasing Managers Index (PMI) indicated the Southeast's manufacturing sector started 2012 off on the right foot. In some areas of the report, January seemed a continuation of the fourth quarter's gradually building momentum, but in the underlying detail of other aspects of the report, January definitely seemed to mark a new year.
Indexes measuring new orders for manufacturers and their employment levels saw healthy increases from December to January, while the index for production—a measure of current manufacturing activity—stayed flat month to month but continued to indicate a mild rate of expansion. The index for commodity prices, an indicator of manufacturer's input costs that is not used in the calculation of the overall PMI, jumped over 15 index points in January.
The January jump in the Southeast new orders index came from a higher percentage of survey respondents, indicating their levels of new orders were higher in January than December, but also contributing to the index gain was a decreased share of contacts reporting lower levels of new orders. The share of contacts reporting decreases in their levels of new orders has been on the decline since September 2011.
The employment index also had a sizable 4.4 index point gain in January. The metrics behind this increase are similar to those underlying the new orders index, but with a bit more of the growth in the index coming from respondents reporting increased employment levels each month. There was an increased share reporting increased manufacturing employment across the Southeast in January, but again, another driver of the index's increase came from a waning share of contacts reporting decreased employment levels.
The finished inventory index also saw a large index point increase in January (up 8.5 points). This increase comes on the heels of the U.S. Bureau of Economic Activity's (BEA) revision of fourth quarter gross domestic product (GDP) that placed a heavier emphasis on inventory investment in the fourth quarter. A significantly higher finished inventory reading for January suggests Sixth District states may be lagging the rest of the country in inventory-building, but hints that inventory investment may still be a net positive to first quarter GDP for 2012.
Southeast manufacturers' commodity prices seemed to diverge from trend in January. In the fourth quarter of last year, each month brought a lower share of contacts reporting increased commodity prices. Then suddenly, in January, that share jumped to 32.4 percent (from 9.4 percent in December).
Back on the surface level, the Southeast PMI's reading for January was roughly in line with the national reading, with the biggest divergence between the two for the month being the production and commodity price indexes. As usual, it's generally not safe to draw too many conclusions from one month of data, but it will be interesting to see if the momentum in the Southeast and national surveys continues in 2012.
By Mark Carter, an analyst in the Atlanta Fed's research department
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