Regional Manufacturing Continues Its Slow but Steady Climb; Can It Continue?
Contacts in the Southeast reported an incremental gain in regional manufacturing activity for the third consecutive month in February. Increases in new orders, production, employment, and finished inventory contributed to the highest Southeast Purchasing Managers Index (PMI) index reading since May 2012.
If you follow this blog regularly, you know that the Southeast PMI is one of the data tools we employ at the Atlanta Fed to track manufacturing activity in the region. The index is produced by the Econometric Center at Kennesaw State University and provides an analysis of the most current market conditions for the manufacturing sector in Georgia, Florida, Alabama, Tennessee, Mississippi, and Louisiana. The index is based on a survey of representatives from companies in those states regarding trends and activity of new orders, production, employment, supplier delivery time, and finished goods. A reading on this index above 50 represents an expansion in the manufacturing sector, while a reading below 50 indicates a contraction.
The Southeast PMI increased 2.8 points from January to February, resulting in a reading of 54.7. As explained above, this reading above 50 indicates expansion and is the highest Southeast PMI since the index hit 57.9 in May 2012. In February, new orders and employment reflected slight increases of less than a percent, 0.4 percent and 0.1 percent, respectively. Production increased 2.9 points while the most substantial increase was in the finished inventories category, which experienced an 11.2 point jump from the month prior to 59.4. The Southeast PMI registered a stronger reading than the national PMI for the first time since last September.
Looking ahead, those of us who follow the manufacturing industry will be anxious to see if this momentum will continue. Forty-five percent of survey participants, those who work in the industry, expect production to be higher in the next three to six months. Therefore, participants as whole do not appear as optimistic as the 57 percent who expected increases over the same time frame in January.
By Amy Pitts, a senior REIN analyst in the Atlanta Fed’s Nashville Branch
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