Regional Economics Information
Font Size: A A A

SouthPoint

04/16/2014

Beige Book: Warming Economy Accompanies Spring’s Thaw

Eight times a year, each of the 12 Reserve Banks gathers anecdotal information on current economic conditions in its district through reports from Bank and branch directors and interviews with key business contacts, economists, market experts, and other sources. Their findings are reported in the Summary of Economic Conditions, also known as the Beige Book. The report is published on the Federal Reserve Board of Governors' website about two weeks prior to each Federal Open Market Committee meeting.

The first sentences of the national summary and each Bank's report often receive much attention because the lead sentence tends to summarize economic conditions in that region.

Here is a compilation of the first sentence of the national summary and each Reserve Bank’s report:

  • National: Reports from the twelve Federal Reserve Districts suggest economic activity increased in most regions of the country since the previous report. (A previous SouthPoint post also mentioned the weather’s effect on overall economic conditions.)
  • Boston: The First District economy continues to expand moderately, according to business contacts, although growth rates vary across sectors and firms.
  • New York: Economic activity in the Second District rebounded since the last report, as the harsh winter weather abated.
  • Philadelphia: Aggregate business activity in the Third District grew at a moderate pace during this current Beige Book period.
  • Cleveland: On balance, economic activity in the Fourth District declined slightly in the past six weeks.
  • Richmond: The Fifth District economy expanded moderately since our last report.
  • Atlanta: On balance, the Sixth District economy expanded at a modest pace from mid-February through March.
  • Chicago: Growth in economic activity in the Seventh District picked up in March, and contacts generally maintained their optimistic outlook for 2014.
  • St. Louis: Business activity in the Eighth District has declined slightly since our previous report.
  • Minneapolis: The Ninth District economy continued to grow at a moderate pace since the last report.
  • Kansas City: The Tenth District economy grew moderately in March, and most contacts were optimistic about future activity.
  • Dallas: The Eleventh District economy grew at a moderate pace over the last six weeks.
  • San Francisco: Economic activity in the Twelfth District continued to improve moderately during the reporting period of mid-February through early April.

As you can see, almost all districts are experiencing the same level of economic activity.

Here are some notable highlights from the Atlanta Fed's contribution to the Beige Book:

Consumer spending and tourism

  • District merchants reported an uptick in activity from mid-February through March following sluggish sales in January, which were widely attributed to the severe winter weather. Light motor vehicle sales grew modestly during the time period.
  • Hospitality contacts in areas negatively affected by the adverse winter weather saw improvements in activity.

Real estate and construction

  • Brokers reported home sales were mixed. Inventory levels continued to fall on a year-over-year basis, and the majority of contacts reported that home prices remained ahead of the year-earlier level.
  • The majority of builders reported that construction activity and new home sales were ahead of the year-earlier level. The majority of contacts continued to report modest home price appreciation.
  • District brokers noted that demand for commercial real estate continued to improve. Construction activity continued to increase at a modest pace from last year.

Manufacturing

  • Manufacturers reported increased activity across the region from mid-February through March. Significant improvements were cited in production and new orders.

Banking and finance

  • Bankers noted an increase in loan demand.

Employment

  • District payroll growth remained constrained from mid-February through March.

Prices and wages

  • Nonlabor input costs increased very slowly, with a few noted exceptions, including rising costs for developed land, construction materials, and food. Profit margins remained tight across most industries as contacts continued to report very little pricing power.
  • Contacts continued to indicate little wage pressure outside of some high-skilled positions.

The next Beige Book will be published June 4.

Photo of Teri GaffordBy Shalini Patel, an economic policy analysis specialist in the Atlanta Fed's research department


April 16, 2014 in Construction, Economic conditions, Economic Indicators, Employment, Housing, Jobs, Labor Markets, Manufacturing, Prices, Purchasing, Real Estate, Unemployment, Weather | Permalink

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a011572565d3f970b01a73dac4104970d

Listed below are links to blogs that reference Beige Book: Warming Economy Accompanies Spring’s Thaw:

Comments

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

04/10/2014

Southeastern Manufacturing...a Lion or a Lamb?

Remember the saying, “March comes in like a lion and goes out like a lamb?” Its origin is believed to be related to the position of the constellations Leo (the lion) and Aries (the lamb) during the month of March. Some observers suggest that it’s simply an indication that the weather is changing, with the end of winter at the first of the month and the beginning of spring at the end of the month.

I’m not sure which is true, but the weather wreaked havoc on the manufacturing industry the last few months. January and February were particularly tumultuous. Manufacturing contacts in the Southeast reported difficulties receiving supplies, shipping orders, and operating production lines at full capacity because some employees were unable to report to work during those two months. The Atlanta Fed has been monitoring the effects of extreme winter weather on the manufacturing industry. The March Southeast Purchasing Managers Index (PMI) suggests that manufacturing has come back roaring, but we should watch out for a bit of bleating (see the chart).

The Southeast PMI is produced by the Econometric Center at Kennesaw State University. A reading on the index above 50 represents an expansion in the manufacturing sector, and a reading below 50 indicates a contraction. The survey provides an analysis of manufacturing conditions in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. Representatives from various manufacturing companies are surveyed regarding trends and activities in new orders, production, employment, supplier delivery time, and finished inventories.

The March Southeastern PMI report came in quite strong. The overall reading of 61.5 was its highest since April 2012. There are a couple of different ways to interpret the strong report. With option one, the report is a result of businesses making up for lost production and order backlogs during the previous months, therefore pushing up production and new orders during March. Under option two, underlying demand is improving and will be robust going forward, and March is just the beginning of a strong year. Let’s take a look at the numbers.

The overall March PMI increased 5.5 points over February. The new orders subindex soared 11.2 points to 70.2 and the production subindex vaulted 10.4 points to 65.4. Going back to January, the new orders subindex has increased 21.2 points and the production subindex has risen 17.5 points. No doubt about it, these are solid increases. The employment subindex increased 6.7 points from February’s 52. The supplier delivery times subindex fell 0.3 point from 57 in February, indicating that purchasing agents are getting their supplies slightly faster than the previous month. The finished inventories subindex also fell 0.3 point compared to February. Optimism among purchasing agents increased during March. Fifty-eight percent of survey participants expect production to be higher over the next three to six months.

Southeast Purchasing Managers Index


Whether option one or option two applies remains to be seen. It could be a combination of both. It will be interesting to see the national Institute for Supply Management report in April. Will the rest of the nation experience a similar rise in manufacturing activity? Let’s hope so. We’d like to see the sharp rise in new orders and production in the Southeast resulting from a sustained improvement in demand rather than just a snap-back effect of improving weather. Either way, we will be keeping our eyes and ears open for the lion and the lamb.

By Troy Balthrop, a Regional Economic Information Network analyst in the Atlanta Fed’s Nashville branch

April 10, 2014 in Inventories, Manufacturing, Productivity, Shipping, Southeast, Weather | Permalink

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a011572565d3f970b01a3fcec1235970b

Listed below are links to blogs that reference Southeastern Manufacturing...a Lion or a Lamb?:

Comments

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

03/11/2014

Has Regional Manufacturing Weathered the Storm?

The weather has been a sore topic among manufacturing contacts across the nation this year, and the Southeast is no different. Inclement winter weather has been extreme and widespread in 2014, but hopefully it is close to being over. Production has been slowed across much of the nation as employees were unable to travel to work and supply deliveries to manufacturing facilities were delayed. The Institute for Supply Management (ISM) specifically identified the weather as having an adverse impact on manufacturing activity in January and February. However, the latest Southeast purchasing managers index (PMI) suggests that maybe the South has weathered the storm.

The Southeast PMI is produced by the Econometric Center at Kennesaw State University. A reading on the index above 50 represents an expansion in the manufacturing sector, and a reading below 50 indicates a contraction. The survey provides an analysis of manufacturing conditions for the region in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The survey asks representatives from various manufacturing companies about trends and activities in new orders, production, employment, supplier delivery time, and finished inventories.

The February PMI increased 5.4 points over January and represents a healthy overall increase, considering the harsh weather conditions (see the chart). The new orders subindex rebounded strongly in February with an increase of 10.0 points to 59 points. The production subindex also had a solid increase of 7.1 points to 55.0. New orders and production had both been contracting in late 2013 and early 2014, so the increases last month were a welcome development. The employment subindex decreased 3.2 points from January’s 55.2. The supplier delivery times subindex and finished inventories subindex both increased during the month, and the prices subindex fell 7.6 points compared with January.

Southeast Purchasing Managers Index

Looking ahead, manufacturing contacts are not as optimistic as they had been in recent months. When asked for their production expectations, only 46 percent of survey participants expect production to be higher in the next three to six months. That expectation is in stark contrast to January when 62 percent of survey respondents expected higher production over the same timeframe.

Hopefully the weather was only a temporary headwind for manufacturing activity. As the mercury begis rising and snow stops falling on the roadways, maybe manufacturing activity will strengthen in March. Then Old Man Winter can go on a nice, long, sunny vacation.

By Troy Balthrop, a Regional Economic Information Network analyst in the Atlanta Fed’s Nashville Branch


March 11, 2014 in Economic conditions, Employment, Manufacturing, Productivity, Southeast, Weather | Permalink

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a011572565d3f970b01a51181bf32970c

Listed below are links to blogs that reference Has Regional Manufacturing Weathered the Storm?:

Comments

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

03/03/2014

Tennessee’s Auto Industry: Pitfalls and Potholes

The automotive industry in Tennessee is one of the big drivers of the state’s economy. Nissan established its first U.S. manufacturing facility in Smyrna in the early 1980s, and auto-related investments have grown in the state ever since. General Motors opened a plant in Spring Hill in 1990, and Volkswagen opened its Chattanooga plant in 2011. These three facilities collectively employ more than 12,000 workers, a total that doesn’t include the vast amount of automotive suppliers that call Tennessee home. Currently, Tennessee is the largest employer of auto-industry workers in the South.

Coming out of the Great Recession, Tennessee is now well positioned to continue its standing as a competitive destination for the automotive industry. In October 2013, the Brookings Institute produced a report titled “Drive! Moving Tennessee’s Automotive Sector Up the Value Chain.” The report pointed out the Volunteer State’s various advantages in the auto industry, which included its geographic location, strong transportation infrastructure, and favorable cost structure.

The report also shared some interesting employment numbers. For example, Tennessee’s share of auto-manufacturing employment in North America increased to an all-time high of 3.3 percent by the end of 2012. Also, more than 12 percent of all jobs created in Tennessee since the recession are related to the auto industry. Needless to say, carmaking is important to the state’s economic health.

The Brookings report also pointed out some competitive challenges and pitfalls the state will need to navigate in the coming years:

  • Cost pressures: Input costs continue to rise, as does the consumer’s demand for greater value. Production increases in low-wage countries will continue to add pressure, even though the labor-cost gap between U.S. locations and low-cost countries is closing.
  • Demographics and workforce: Technology advances have made the automotive-manufacturing workplace much more sophisticated. The challenges to find an adequately trained workforce will be a constant challenge.
  • Technology: The entire automobile production system and product line will require constant technological upgrades to keep pace with changing regulatory requirements. For innovations to be effective, they will need to reach far into the automaking supply chain.

The Brookings report also suggested that the state lacks a strategic approach to maintaining a business-friendly environment for advanced industries. For example, Tennessee ranks in the bottom fifth of states in terms of tax competitiveness for new research-and-development firms and labor-intensive manufacturing.

The report also indicated that holes exist in Tennessee’s workforce-development programs. The state falls short in literacy, numeracy, and educational attainment, gaps that complicate the state’s ability to ensure the availability of an educated workforce for the auto industry. Also pointed out in the report was the state’s lack of research and development activity in the auto sector. The state also lacks a fertile technology network that caters to auto-sector suppliers, particularly the smaller ones.

Despite all these factors, the future for Tennessee’s auto industry looks bright. The state has momentum and the necessary resources to adapt to future challenges. Tennessee has the continent’s broadest automaking supply chain, a huge advantage in today’s auto-manufacturing environment. Past success does not guarantee future performance, but hopefully Tennessee can avoid the potholes on the road ahead.

By Troy Balthrop, a Regional Economic Information Network analyst in the Atlanta Fed’s Nashville Branch


March 3, 2014 in Automobiles, Employment, Jobs, Manufacturing, Tennessee, Transportation | Permalink

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a011572565d3f970b01a5117b1739970c

Listed below are links to blogs that reference Tennessee’s Auto Industry: Pitfalls and Potholes:

Comments

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

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

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

01/16/2014

The Beige Book Looks Rosy

The Federal Reserve released the first Beige Book of 2014 on January 15. To prepare the Beige Book—published eight times per year—each Reserve Bank gathers anecdotal information on current economic conditions in its district through reports from Bank and branch directors and interviews with key business contacts, economists, market experts, and other sources.

The first paragraph from the national summary began with this sentence:

Reports from the twelve Federal Reserve Districts suggest economic activity continued to expand across most regions and sectors from late November through the end of the year.

The Atlanta Fed was one of two Reserve Banks that saw conditions improve compared with the previous reporting period. Overall, we said that “[b]usiness contacts indicated that from late November through December overall economic conditions improved moderately in the Sixth District.”

Below are highlights from our report, beginning with the important sections on employment and inflation:

  • Businesses did not indicate a significant pickup in hiring, nor did they report any staff reductions. Businesses continued to employ technology and utilized overtime and contract labor as an alternative to increasing permanent staff. Contacts in manufacturing, construction, professional, and energy sectors report persistent difficulty in finding qualified workers. On balance, many firms expressed continued hesitancy caused by concerns about healthcare reform in terms of their overall hiring plans.
  • Cost pressures remained mostly stable, according to business contacts. Healthcare was the most cited exception, with reports of larger cost and price increases than usual. Merit increases remained in the 1 to 3 percent range. However, skilled and professional positions in energy, construction, information technology, and logistics continued to see above-average wage increases and higher starting pay. Year-ahead unit costs expectations were 1.9 percent in December, unchanged for the fourth consecutive month, according to the Atlanta Fed's survey on business inflation expectations.

Most sectors of the regional economy reported a solid start to the new year:

  • District merchants noted positive year-over-year holiday sales growth, with online sales outpacing traditional store sales.
  • The hospitality sector continued to experience the same solid pace of activity that it had all year long.
  • Residential housing brokers noted that existing home sales growth continued to slow, while homebuilders experienced modest growth in new home sales.
  • Commercial contractors described construction activity as improving, especially in the multifamily segment of the market.
  • Manufacturers indicated that overall activity strengthened since the previous report.
  • Capacity utilization in the energy industry remained near historic highs, and deep water oil exploration in the Gulf of Mexico increased.

Atlanta Fed business contacts held a positive outlook heading into 2014. Atlanta Fed President Dennis Lockhart shared this view in a speech delivered to the Rotary Club of Atlanta on January 13, where he said:

I expect the stronger pace of economic growth in the second half of 2013 to continue in 2014. My current view is that real GDP will expand between 2.5 and 3 percent this year, and I would not be surprised if we achieve results at the upper end of this range.

A new year often breeds optimism, sometimes misplaced. But based on our view of the data and what our business contacts are saying, we think that being optimistic this January is justified.

Photo of Michael ChrisztBy Michael Chriszt, a vice president in the Atlanta Fed’s public affairs department


January 16, 2014 in Economic Indicators, Employment, Growth, Housing, Inflation, Manufacturing, Prices, Productivity | Permalink

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a011572565d3f970b01a3fc4e01cb970b

Listed below are links to blogs that reference The Beige Book Looks Rosy:

Comments

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

01/09/2014

Regional Manufacturing Ends 2013 with a Whimper, but Optimism Is Rising

Although manufacturing in the Southeast was in expansion territory for 10 of the first 11 months of 2013, the sector closed out the year in unspectacular fashion. The December Southeast Purchasing Managers Index (PMI) report was released on January 6, and the final reading for 2013 was 48.4 points, which is a 3.8-point drop from November, a disappointing finish to what was a good year. However, the average PMI for 2013 was a not-so-bad 52.0, and optimism among purchasing agents climbed for the second consecutive month.

The Southeast PMI is produced by the Econometric Center at Kennesaw State University and provides an analysis of current conditions for the manufacturing sector in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The survey is based on responses from purchasing agents from manufacturing companies in those states. The survey measures activity in new orders, production, employment, supplier delivery time, and finished inventories. A reading on this index above 50 represents an expansion in the manufacturing sector, and a reading below 50 indicates a contraction.

The 3.8 point drop in December can be attributed almost entirely to weakness for new orders and production. Both indexes fell 12.2 points compared with November and were at their lowest readings for all of 2013. Interestingly, both indexes experienced similar contractions in July 2013, only to rebound the following month into expansion territory. The employment index held firm at 52, which generally indicates manufacturing payrolls increased during the month. The supplier delivery times index increased 2 points, meaning that purchasing agents are waiting longer to get materials from their suppliers. Slower delivery times are generally interpreted as a sign that suppliers are experiencing strong demand for their products. The finished inventories index was up 3.1 points over November. The index remained below 50 for the eighth consecutive month, suggesting that customer inventories are low or close to desired levels (see the chart).

Southeast Purchasing Managers Index

At the state level, only Georgia and Florida closed out the year in expansion territory. Florida was particularly strong, registering 58.1 points in December. Alabama, Louisiana, Mississippi, and Tennessee all ended the year below the 50-point threshold.

A very encouraging aspect of the December report was the optimism level of survey respondents. When asked for their production expectations for the next three to six months, 53 percent expect production to be higher, the highest level of optimism since January 2013.

Based on input from the Atlanta Fed’s contacts in manufacturing and on trends in national data, it appears unlikely that December’s fall in regional new orders and production is the beginning of a trend. In addition, with the employment index expanding and the level of optimism for future production rising, conditions appear favorable that the Southeast PMI will rebound in January. In the meantime, singing a stanza of “Auld Lang Syne” to bid farewell to 2013 might be in order. Or if you’re like me, just sing the first line (because that’s all you know) and mumble the rest. Here’s wishing everyone a happy new year!

By Troy Balthrop, a Regional Economic Information Network analyst in the Atlanta Fed’s Nashville Branch


January 9, 2014 in Construction, Employment, Manufacturing, Productivity, Southeast | Permalink

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a011572565d3f970b01a3fbf23155970b

Listed below are links to blogs that reference Regional Manufacturing Ends 2013 with a Whimper, but Optimism Is Rising:

Comments

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

12/13/2013

November PMI: A Harbinger of Future Expansion?

Manufacturing in the Southeast has performed fairly well in 2013 based on the southeastern Purchasing Managers Index (PMI) report. Every month this year, with the exception of September, has registered expansion in the manufacturing sector. Although most of the monthly data have not been spectacular, they have, shall we say, held the line. November was no different, registering 52.2 points. The November report was a modest gain of 1.8 points over October. The disconcerting element found in this year’s PMI reports has been the low production expectations of survey participants. Since April, month after month had seen low production expectations for the next three to six months. That trend finally took a turn for the better in November.

The southeastern PMI is produced by the Econometric Center at Kennesaw State University. The report surveys purchasing managers from the states of Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The index is a composite index that equally weighs five indicators including, new orders, production, employment, supplier delivery times, and finished goods inventory. A reading on the index above 50 represents an expansion in the manufacturing sector, and a reading below 50 indicates a contraction.

New orders, production, and supplier delivery times indicators rose in November. The new orders indicator increased 3.1 points in November to 55.1, and the production indicator increased 4.1 points to 55.1. The supplier delivery times indicator increased 4.0 points to 53.1, meaning purchasing agents are waiting longer to get the supplies they ordered. November’s report saw a mild decline in the employment indicator as it dropped 0.9 points to 52.0. The employment indicator still reads above 50, which generally indicates payrolls are growing. The finished inventories indicator fell 1.1 points, which indicates low customer inventories and which could in turn lead to greater future production.

Southeast Purchasing Managers Index

All indicators in the southeastern PMI index could be viewed positively in November, but the most encouraging aspect of the November report was the increase in the level of optimism. When asked about their production expectations during the next three to six months, 45 percent of survey respondents said production will be higher, a healthy increase from October’s tepid 27 percent. Optimism had been waning throughout the summer and fall months. The November increase gives us a boost of hope that manufacturing in the Southeast will continue its expanding ways as we close out 2013. Looking ahead, one could say that many signs point to a strong December. Mix up some expanding new orders, higher production, lower inventory levels, supplies that are in high demand, add a dash of optimism, and it just might make a pretty good manufacturing dish.

By Troy Balthrop, a Regional Economic Information Network analyst at the Atlanta Fed’s Nashville Branch

December 13, 2013 in Employment, Manufacturing, Prices, Productivity, Southeast | Permalink

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a011572565d3f970b019b02caf2d7970b

Listed below are links to blogs that reference November PMI: A Harbinger of Future Expansion?:

Comments

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

12/11/2013

Beige Book: Southeast Growing at a Moderate Pace

Eight times a year, the 12 Reserve Banks gather anecdotal information on current economic conditions in their districts through reports from Bank and branch directors as well as interviews with key business contacts, economists, market experts, and other sources. Then, approximately two weeks prior to each Federal Open Market Committee meeting, results are published in the Beige Book on the Federal Reserve Board of Governors' website.

Because the lead sentence—of the national summary and each district's section—often gives a broad view of economic conditions in that region, that first sentence often gets much attention. Here is a roundup of the first sentences of these sections:

  • National: Reports from the twelve Federal Reserve Districts indicated that the economy continued to expand at a modest to moderate pace from early October through mid-November.
  • Boston: Economic activity continues to expand in the First District.
  • New York: Economic growth in the Second District has continued at a moderate pace since the last report.
  • Philadelphia: Aggregate business activity in the Third District continued to rise at a modest pace during this current Beige Book period (beginning with the first partial week of October).
  • Cleveland: Business activity in the Fourth District expanded at a moderate pace since our last report. On balance, demand for manufactured products grew at a moderate rate.
  • Richmond: The District economy expanded moderately in recent weeks.
  • Atlanta: Businesses across the Sixth District described economic activity as moderately increasing from October to mid-November.
  • Chicago: The rate of growth in economic activity in the Seventh District continued to be modest but slowed a bit in October and early November.
  • St. Louis: Business activity in the Eighth District has expanded at a moderate pace since the previous report.
  • Minneapolis: The Ninth District economy grew at a moderate pace since the last report.
  • Kansas City: The Tenth District economy continued to grow modestly in November.
  • Dallas: The Eleventh District economy expanded at a moderate pace over the past six weeks.
  • San Francisco: Economic activity in the Twelfth District expanded at a modest pace during the reporting period of early October through late November.

As you can tell, all 12 districts experienced similar levels of activity. Here are some notable highlights from the Atlanta Fed's portion of the Beige Book:

Employment
On balance, contacts across the private sector reported that the partial federal government shutdown had little to no direct impact on employment, but it has negatively affected business confidence, which could translate into delayed hiring decisions now or in the near term. Contacts continued to express concern about shortages of qualified labor. Their concern is that companies seeking to hire and expand their business could be impeded by an inability to find qualified workers. Overall, firms experiencing any growth in demand for their products expressed no plans to hire in the near term.

Prices
Contacts continued to report stable pricing, with no major concerns about inflation. Isolated reports of cost increases (for example in fast food, grocery stores, and construction) were generally passed through successfully to customers. Year-ahead unit cost expectations were unchanged at 1.9 percent in November, according to the Atlanta Fed's Business Inflation Expectations survey (see the chart). Overall, profit margins were tight across most industries. Aside from scattered reports of upward pressure on wages for high-skilled workers, increases remained stable (mostly in the range of 2 percent to 3 percent) across most industries.

Year-Ahead Unit Cost Expectations

Consumer spending and tourism
District retail contacts indicated that economic uncertainty was having an impact on consumer confidence and behavior. Although merchants reported plans to offer robust discounting, beginning even earlier than the traditional Black Friday, retailers' expectations for the upcoming holiday season are only mildly optimistic. Sales of light vehicles were steady. Hospitality firms continued to cite expanding levels of activity in both leisure and business travel.

Real estate and construction
District brokers indicated that growth of existing home sales have slowed notably in recent months. By most accounts, inventory levels continued to decline on a year-over-year basis. Home prices remained ahead of the year-earlier level, but price gains seemed to be slowing. The majority of builders noted that new home sales and construction were ahead of the year-earlier level. Reports on unsold inventory were mixed, while contacts continued to note modest home price appreciation. District commercial brokers noted that demand for space continued to improve modestly. Construction activity slightly increased as well from earlier in the year.

Manufacturing
District manufacturers reported gains in new orders, production, and employment in October compared with the previous month. An increasing number of contacts cited higher-than-desired finished inventory levels and remarked that commodity prices continued to rise, albeit at a modest rate. Manufacturers also noted a mild decrease in supplier delivery times.

Banking and finance
Banking contacts reported better overall lending activity relative to our previous report, although loan demand in rural areas remained low. Commercial real estate lending increased as property values rose; commercial and industrial and auto lending was strong. Mortgage lending and refinancing activity slowed as mortgage interest rates increased. Deposit levels were high at most institutions, and banks remained competitive in seeking quality loan customers. Some banks loosened underwriting standards and reduced margins to attract new loan business.

The next Beige Book will be published January 15.

Photo of Shalini PatelBy Shalini Patel, an economic policy analysis specialist in the Atlanta Fed's research department

 

December 11, 2013 in Banks and banking, Beige Book, Commodity Prices, Construction, Economic Indicators, Employment, Inflation, Jobs, Manufacturing | Permalink

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a011572565d3f970b019b028bacfc970d

Listed below are links to blogs that reference Beige Book: Southeast Growing at a Moderate Pace:

Comments

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

11/13/2013

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.

Southeast Purchasing Managers Index

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


November 13, 2013 in Economic Indicators, Employment, Fiscal Policy, Manufacturing, Productivity, Southeast | Permalink

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a011572565d3f970b019b01080ed6970d

Listed below are links to blogs that reference Regional Manufacturing Rebounds in October:

Comments

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