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The Atlanta Fed's SouthPoint offers commentary and observations on various aspects of the region's economy.

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Regional Manufacturing Welcomes a Pickup in New Orders

As reported in a post on regional manufacturing last month in SouthPoint, contacts in the Southeast experienced a slight deceleration in activity in the region during the month of June, and at the same time the Southeast Purchasing Manager’s Index (PMI) continues to reflect overall expansion. Despite this slowing in expansion, it is encouraging that new orders and production experienced an increase from the previous report.

If you read SouthPoint regularly, you know that the Southeast PMI 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 Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. 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, and a reading below 50 indicates a contraction.

In June, the overall Southeast PMI ticked down slightly to 52.9 points, from 53.2 in May. Similar to the index results in May, June’s decline was based on decreases in three component areas. In May, the PMI saw declines in new orders, production, and finished inventory. The latest release offered encouragement with increases in new orders and production but reflected declines in the areas of employment, supply deliveries, and finished inventory. The June increase in new orders reflected the highest reading for that component since September 2012 (see the chart). This reading offers hope that finished inventories might see an increase in the coming months.

Looking ahead, there was little to no change from May to June in the number of survey participants who expect production to be higher in the next three to six months. Now that the Southeast PMI report for June has been released, we can confidently state that regional manufacturing experienced expansion for the first half of 2013. However, with the two most recent months experiencing a slowing in the rate of expansion as a result of declines in three varying components of the survey, it will be interesting to see what the second half of the year will bring.

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

July 11, 2013 in Economic Growth and Development , Economic Indicators , Manufacturing , Southeast | Permalink


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