Regional Manufacturing Hums a Familiar Tune in August
If you have ever operated a piece of machinery, you know that when it’s operating correctly, it has a certain hum to it. It’s hard to describe, but you know it when you hear it. In a post last month on regional manufacturing in SouthPoint, you’ll recall I suggested that manufacturing in the Southeast has been performing well during 2013. You may also recall I mentioned some softening in activity that had been taking place during the previous three months. The latest release of the Southeast purchasing managers index (PMI) report indicates that manufacturing activity has stabilized. Although the overall reading for the index was only up slightly, the Southeast PMI indicated expansion in the manufacturing sector for the eighth consecutive month in August, which keeps the hum going for 2013.
The Southeast PMI is produced by the Econometric Center at Kennesaw State University. It provides an analysis of manufacturing conditions in the states of Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The index is compiled from a survey of companies in those states regarding trends and activities in new orders, production, employment, supplier delivery time, and finished goods. A reading on the index above 50 represents an expansion in the manufacturing sector, and a reading below 50 indicates a contraction.
In August, the Southeast PMI overall reading stood at 50.6. The index increased a mild 0.4 points compared with July, but it was an increase nonetheless. Increases in production of 7.6 points, 3.0 points in commodities, 0.9 points in finished inventories, and 2.8 points in new orders helped the overall index maintain its position above the expansion threshold of 50. Supply deliveries decreased 6.6 points, and employment fell 2.2 points. At the state level, Tennessee experienced a sharp overall increase of 16.7 points, which offset decreases in Alabama, Georgia, Florida, Louisiana, and Mississippi.
Optimism, however, continues to be hitting some off-key notes. When asked about their production expectations for the next three to six months, only 33 percent of respondents expect higher production, a slight decrease from 34 percent in July. Twenty-five percent expect their production to decrease over that same time period, up from 21 percent in July. The index value for manufacturers’ outlook remains above 50, however, at 53.8 points. Despite some decline in optimism, manufacturing in the Southeast will hopefully continue to hum (and expand) as we head into the fall.
By Troy Balthrop, a Regional Economic Information Network analyst in the Atlanta Fed’s Nashville Branch
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