The Atlanta Fed's SouthPoint offers commentary and observations on various aspects of the region's economy.
The blog's authors include staff from the Atlanta Fed’s Regional Economic Information Network and Public Affairs Department.
Postings are weekly.
Regional Manufacturing Treads Water in January
The South has been unusually cold this winter. Like much of the country, we have been dealing with the polar vortex. I'd never heard the term "polar vortex" until this year, and I hope I don't hear it again for a long time.
The polar vortex appears to be influencing manufacturing as well. Many analysts believe that the unseasonably severe winter weather was responsible for the latest drop in the national purchasing managers index (PMI) index, which is produced by the Institute of Supply Management. January's index reading of 51.3 points was a significant 5.2 point drop from December. The new orders subindex experienced its largest month over month drop since December 1980.
Conversely, the Southeast PMI increased slightly from December and at least got its head above water. After contracting in December, the index increased 2.2 points in January, to 50.6.
The Atlanta Fed's research department uses the Southeast PMI to track regional manufacturing activity. The Econometric Center at Kennesaw State University produces thesurvey, and it provides an analysis of current conditions for the manufacturing sector in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The PMI is based on a survey of purchasing managers from manufacturing companies and analyzes trends concerning new orders, production, employment, supplier delivery time, and inventory. A reading above 50 indicates that manufacturing activity is expanding, and a reading below 50 indicates that activity is contracting.
Despite the pedestrian increase in the Southeast PMI index, it crept back into expansion territory. The new orders subindex rebounded 6.1 points to 49, up from a dismal December reading of 42.9. Likewise, the production subindex increased 5.1 points to 47.9. Production declined significantly in December when it lost 12.2 points. The employment subindex increased 3.2 points from December's 52 points, indicating that survey participants increased payrolls on net in January. Supplier delivery times fell 4.1 points from 55.1 in December, to 51.0 in January, suggesting that purchasing agents are getting their supplies faster than the previous month. Finished inventories increased to 50.0 in January, up a full point over December's 49, meaning that manufacturer customers are generally satisfied with their inventory levels (see the chart).
The most exciting and encouraging news in the latest PMI report for the Southeast was the responses to the production expectations question. Survey participants were asked for their production expectations for the next three to six months. In January, 62 percent of respondents expect production to be higher going forward. The unofficial optimism level gleaned from this question has been rising for three consecutive months. With any luck, the increased optimism will manifest as higher production throughout 2014.
While the January PMI reading just barely got its head above water, increases in new orders, production, and employment are a good sign. In the coming months, let's hope manufacturing does a little less treading water and a lot more swimming. Swimming is so much more fun, and it means there's no polar vortex.
By Troy Balthrop, an Regional Economic Information Network analyst in the Atlanta Fed's Nashville Branch
TrackBack URL for this entry:
Listed below are links to blogs that reference Regional Manufacturing Treads Water in January:
- Tiny Bubbles in Alabama
- Through the Eyes of a Big Fan
- Southeastern Manufacturing Sees No Shadow
- Southeastern Labor Market Continues Strengthening
- A New Year, a Better Economy?
- Florida's Economic Rebound Continues
- Charting Employer Sentiment in the Southeast
- O Manufacturing, Is Winter Thy Enemy?
- New Orleans Area Optimistic Heading into 2015
- Florida's Job Report Shines Bright
- March 2015
- February 2015
- January 2015
- December 2014
- November 2014
- October 2014
- September 2014
- August 2014
- July 2014
- June 2014
- Banks and banking
- Beige Book
- Business Cycles
- Commodity Prices
- Consumer Savings
- Data Releases
- Disaster recovery
- Economic conditions
- Economic Growth and Development
- Economic Indicators
- Fiscal Policy
- Gulf Coast
- Health Care
- Holiday Sales
- Labor Markets
- Local Economic Analysis and Research Network (LEARN)
- Monetary Policy
- Natural Disasters
- New Orleans
- Oil Spill
- Real Estate
- Sales Tax