Regional Economics Information
Font Size: A A A

SouthPoint

« Atlanta Fed Survey Highlights Regional Employment Plans for 2014 | Main | Retailers Heading into 2014 with Momentum »

02/11/2014

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


February 11, 2014 in Manufacturing, Southeast | Permalink

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a011572565d3f970b01a73d757862970d

Listed below are links to blogs that reference Regional Manufacturing Treads Water in January:

Comments

Feed You can follow this conversation by subscribing to the comment feed for this post.

Post a comment

Comments are moderated and will not appear until the moderator has approved them.

If you have a TypeKey or TypePad account, please Sign in