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 Rebounds in October
The southeastern purchasing managers index (PMI) rebounded slightly in October after a lackluster showing in September. However, the rebound was not spectacular. The index increased to a level that still does not signify a major uptick in activity. The good news is the October report put regional manufacturing back into expansion territory and headed in a positive direction. The bad news is that optimism among purchasing managers continues to go in the opposite direction.
Produced by the Econometric Center at Kennesaw State University, the southeastern PMI surveys purchasing managers in the Southeast concerning manufacturing activity. The survey includes Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The survey asks questions concerning activity 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.
The October index came in at 50.4 points and reported gains in every subindex, with the exception of supplier deliveries. A very encouraging increase of 5.3 points in new orders led the way. Another optimistic sign was the increase of 3.8 points in employment. The rise in new orders and employment could indicate that manufacturers are expecting production to increase in the coming months. Other subindex increases included gains of 1.0 point in production, 2.1 points in finished inventory, and 2.2 points in commodity prices. Supplier deliveries decreased 2.6 points during the month, meaning purchasing managers are receiving orders from their suppliers more quickly, but this decline could be the result of lower demand for products across the board. At the state level, all states in the region were in expansion territory with the exception of Tennessee and Mississippi.
Optimism among purchasing managers has been declining, and it continued on a downward trend in October. When asked about their production expectations for the next three to six months, only 27 percent of respondents expect higher production, down from 30 percent in September. Optimism has been dropping for several months among survey respondents.
As optimism continues to wane, we can only wonder what might be the underlying causes that are dampening purchasing managers confidence. It may simply be the result of the larger hit to confidence resulting from the recent fiscal policy turmoil. As Atlanta Fed President Dennis Lockhart noted in his November 12 speech in Montgomery, Alabama:
My greater concern relates to fiscal policy uncertainty because it can affect consumer and business confidence. I've recently heard opinions among contacts in the region to the effect that consumer confidence took a hit with the debt ceiling drama and the shutdown.
It remains to be seen if the trend President Lockhart noted affects manufacturing. It would be encouraging to see the confidence level of purchasing managers in the Southeast begin to rise, and as we enter the holiday season, we will continue to monitor this indicator.
By Troy Balthrop, a Regional Economic Information Network analyst at the Atlanta Fed’s Nashville Branch
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More insights from the 2012 NABE Economic Policy Conference
Last week, SouthPoint primary blogger Mike Chriszt and I traveled to Washington, D.C., for the 2012 National Association of Business Economists' (NABE) Economic Policy Conference (see Mike's previous post). After a few words from Federal Reserve Board Chairman Ben Bernanke, a flurry of breakout sessions ensued. One of the more positive ones I attended focused on state government finances.
Highlights of a regional economic update
Steve Cochrane of Moody's Analytics gave a regional economic update in this session, with his talk looking at the most recent regional data available through the lens of state government finances (a job growth forecast, for example, might hint at an increase in income tax collections). I was pleased, for at least two reasons, to see most of the Sixth Federal Reserve District's states in green, as the chart below shows, which indicates that job growth should be at or above the national average by the end of 2012, at least according to Moody's Analytics.
Another Moody's slide that may be of particular interest to SouthPoint readers is the one below, which shows that regional indexes measuring exports of goods and commodities were highest in the South at the end of last year. Of course, the chart reflects the Census Bureau's definition of the "South," which is not precisely the Sixth Federal Reserve District. Still, all Sixth District states are included in this aggregation.
State government finances
The part of the session that honed in on state government finances was encouraging, but hinted it may not be time just yet to uncork the champagne bottles at governors' mansions just yet. Though state governments have definitely seen their coffers begin to recover in 2010 and 2011, the deep losses seen in 2008 and 2009 still make the four-year period a net loss.
For the most part, layoffs among state and local government positions are likely at their end, if not close, and that revenues are picking up nearly across the board. For example, according to a March 19 Rockefeller Institute report on state taxes, 41 states reported gains during the fourth quarter of 2011, while just 9 reported declines in overall tax collections for the quarter . One of those nine states still reporting declines in state revenues, Louisiana, lies within the Sixth Federal Reserve District.
We also heard that states may be finding more creative ways to increase revenues. This sentiment is also reflected in a recent article in The Economist, which noted some significant budgetary changes the State of Georgia has made this session. They include:
- Eliminating taxes on energy used in manufacturing
- Taxing online sales in the state
- Setting a goal to lower personal income tax from its current level of 6 percent to 4 percent by 2014 (to be slightly more competitive with neighbors Tennessee and Florida, who levy no personal income tax)
It will be interesting to see what other states are doing in creative ways to spur economic growth over the course of 2012, but that's another blog for another day.
By Mark Carter, a senior economic research analyst in the Atlanta Fed's Research Department
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The Great Rebalancing: State and local government fiscal challenges
Earlier this week, Federal Reserve Bank of Atlanta President Dennis Lockhart spoke in West Palm Beach, Fla., about the current phase of American economic history, which he termed the "Great Rebalancing." (In his remarks, Lockhart noted that he borrowed this term from a reference to the economic recovery in Britain.) Lockhart sees three rebalancing processes now under way: rebalancing of consumption and savings, regulatory rebalancing, and fiscal rebalancing. With regard to the latter, he noted that
"Spending cuts have begun at all government levels, and some improvement in revenues is now being reported. The extent of cuts is being discussed, quite literally, as we speak."
While, as Lockhart noted, it is too early to determine the outcome of overall fiscal rebalancing at the national or state level, we can look at public sector employment at the state and local levels to see where some of this rebalancing currently is taking place. State and local employment data through February show that the number of public sector workers (excluding federal employment) has been on the decline for some time, while private sector employment is increasing.
With regard to improvements in revenues, the data are more clear. Looking at the states in the Southeast, revenues are indeed on the upswing.
A recent report by the Nelson A. Rockefeller Institute of Government, written by Lucy Dadayan, senior policy analyst, and Donald Boyd, senior fellow, confirms that
"After the deepest recession since the Great Depression, most states are now on the gradual road to tax revenue recovery."
President Lockhart's view that fiscal rebalancing lies mostly ahead of us is confirmed by the Rockefeller Institute authors, as they caution that
"Broad state fiscal conditions remain fragile. The longer-term outlook is still ominous due to record revenue declines during the Great Recession, spending trendlines still pointing upward, and unemployment rates remaining nearly double their prerecession levels, to name a few. While some economic indicators signal improvement in overall conditions, fiscal recovery for the states typically lags a national turnaround and is likely to take several years."
By Mike Chriszt, an assistant vice president in the Atlanta Fed's research department
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ARRA: It ain't over 'til it's over
For better or worse, the American Recovery and Reinvestment Act (ARRA, also known as the federal stimulus) is fading from most major headlines, and though the bulk of its economic impact is arguably behind us, several provisions have yet to be implemented, including more than 1,400 awards from around the Sixth District that had not begun as of the summer.
An "award" is any contract, grant, or loan made to a state as a result of the federal stimulus package. Most awards to Sixth District states so far have been in the forms of grants to departments of transportation, governors' offices, and departments of education.
It's also noteworthy that Sixth District states haven't received even half of the amounts that they've been awarded (as of June 30, 2010). A large reason for this is that federal agencies are stillwaiting for proposals on how state and local governments will spend grant money. Cities must disclose full project plans before grants are awarded, and navigating the red tape, bidding, and permitting processes slows how quickly states receive federal funds. Additionally, several contracts (the second-largest award category) won't be paid for until the work is 100 percent completed.
One question is on the minds of many: Where has the money been going so far?
In many states around the nation, including Sixth District states, state departments of transportation had lots of shovel-ready projects in hand at the time of ARRA's signing. This readiness is why, in the table below, you can see each state's department of transportation was either the first or second most-funded category from the stimulus as of June 30, 2010.
The table below shows each Sixth District state's top five recipients of stimulus dollars to date. (All dollar amounts are in millions.)
From a national perspective, Christopher Flavelle and Jeff Larson of ProPublica have been keeping track of stimulus spending and funding allotments in their "Eye on the Stimulus" coverage. In a recent article they included a nifty graphic (similar to the one below) that sums up stimulus spending simply. As of this writing, their figures were updated Tuesday, October 19.
The authors' definitions provide a good deal of clarity:
Spent: Money that has actually been paid, leaving the government's bank account and entering the economy.
In Process: Money that has been committed to a certain project but not yet paid out.
Left to Spend: Money set aside for an agency to spend but which the agency has not yet decided how to spend.
Only time will tell how much economic impact comes from the "in process" category and the money still on the table.
By Mark Carter, an economic analyst in the Atlanta Fed's research department
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- Southeastern Transportation: Tapping the Brakes?
- Southeast Manufacturing Slows in August
- It's Mostly Sunny in Florida
- Auto Manufacturing an Economic Boon for Tennessee
- Southeast Manufacturing Rebounded in June
- Southeast Manufacturing Dips in May
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- Seeking the Slack
- Middle Tennessee Consumer Confidence on the Rise
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