12/07/2011
Moderately happier holidays from the Southeast PMI!
Earlier this year, it looked as though the manufacturing sector would be a key driver of the region's economy. Back in April, 55 percent of respondents in the Southeast purchasing managers index (PMI) survey, conducted by Kennesaw State University's (KSU) Econometric Center, said their orders levels were improving on a month-over-month basis. Though one might expect this number to give up a few percentage points after hitting a peak as high as April's, as spring gave way to summer across the Southeast there was a palpable drop in the percentage of contacts reporting higher new orders. Purchasing managers then began to report a dip in production levels. By fall, the Southeast PMI was whistling a tune similar to one we'd been hearing from other sectors: slow growth and not much else to write home about. Facing what seemed like one headwind after another this year, the sector was beginning to look just downright flat, if not beginning to contract a tiny bit.
Released Monday, however, the November Southeast PMI Report may give those remaining optimists out there a bit more breathing room. The report's headline number is not always necessarily the highlight of the report, with November being one of those months, though the headline number does appropriately seem to signal a step away from the floor of the index. (A measure of 50 index points or greater signals growth, and any sustained reading below 50 indicates contraction.) Drivers of the index last month were new orders and production, the future-looking and current measures of the Southeast manufacturing sector's health. Both the percent of contacts reporting increased orders and production levels compared with the previous month was up in November (see the chart above), which drove the new orders and production components higher than October's reading (see the table).
Another welcome trend for Southeast manufacturers: a higher percentage of contacts reported paying less for commodity inputs in November than in October. The trend was also true for October, when a greater share of contacts noted paying less for inputs than in September. October ended a 28-month streak of contacts reporting an increase in commodity input prices.
For more on the Southeast PMI, including how to take the survey and receive monthly emails with the results, check out Kennesaw State University's Econometric Center's PMI page.
By Mark Carter, an analyst in the Atlanta Fed's research department
December 7, 2011 in Manufacturing | Permalink
TrackBack
TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a011572565d3f970b0162fd7f409c970d
Listed below are links to blogs that reference Moderately happier holidays from the Southeast PMI!:
Comments
10/19/2011
A tale of two indicators
The national manufacturing Purchasing Managers Index (PMI) produced by the Institute for Supply Management (ISM) is considered by many economy watchers to be a, if not the, most important leading indicator measuring the health of the U.S. manufacturing sector. Throw in timeliness, a fair degree of accuracy, and a correlation with gross domestic product growth, and you can see why it's an indicator to be taken seriously. On the first business day of each month at 10 a.m., I am one of many analysts around the world constantly refreshing my browser to be one of the first to see the health of the manufacturing sector over the previous month. Our own regional version of this, the Southeast PMI, is produced just up I-75 from the Atlanta Fed at Kennesaw State University's Econometric Center. As its name suggests, the Southeast PMI measures the manufacturing health of roughly the same geographical area as the Fed's district (Georgia, Florida, Alabama, Tennessee, Mississippi, and Louisiana). As one might suspect, these two indicators are usually highly correlated, with major divergences in their data only lasting an average of one or two months.
In August, the national PMI was flirting with contraction territory, which is any reading below 50 on an indexed scale, at 50.6 points. The widely watched release of the indicator on September 1 spooked skittish investors and raised the eyebrows of analysts around the nation. However, here in the Southeast, it looked like a somewhat brighter picture for August: the Southeast PMI reading was higher than the national PMI by more than 7 index points for the month, and it had safely cleared the benchmark indicating growth at 57.8 points. I was blogging about silver linings in the manufacturing sector and the General Motors plant reopening in Spring Hill, Tenn. Could it be that maybe things weren't so bad after all?
Then data for September were released.
The Southeast PMI shed 8.4 index points during September, catching up (or "down," if you will) with the more cautious national PMI. Broad-based losses in every survey category took readings for employment, supplier deliveries, and commodity prices back to historical "norms" from slightly elevated levels, but losses in the new orders and production categories went further south, signaling a possible turnaround in sentiment from roughly the same managers who seemed much more optimistic one month prior. In September, these two critical components of the Southeast PMI—new orders and production—fell below 50 index points for the first time in 2011. This is not the first time those components have dipped below 50 points since the National Bureau of Economic Research declared that the recovery from recession began in June 2009. But if data for October show a new-orders reading below 50, it will be the first two consecutive months below 50 for this component—which is considered to be an indicator of future manufacturing activity—since the recession (specifically, since the first quarter of 2009).
Here's how all Southeast PMI components fared against their national counterparts in September:
Keep an eye out for October data: The ISM releases its reading on the national manufacturing sector on the first business day of each month, referencing the previous month. The Southeast/regional data are released on the fifth business day of the following month by Kennesaw State University's Econometrics Center. To receive a copy of the Kennesaw State University release, sign up to take the three-minute survey at the Econometric Center's website.
By Mark Carter, an economic analyst in the Atlanta Fed's research department
October 19, 2011 in Manufacturing | Permalink
TrackBack
TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a011572565d3f970b0153926ee96b970b
Listed below are links to blogs that reference A tale of two indicators:
Comments
10/06/2011
General Motors reopens Tennessee plant as it seizes market share
Cranking out more than 207,000 vehicles in September, General Motors was the nation's largest auto manufacturer by volume and has gained the most volume in the first nine months of 2011. Conversely, Toyota has lost the most volume so far in 2011 (down 116,793 units from this point last year). GM has been aggressively seeking a cut of Toyota's market share since the supply chain disruptions earlier this year, but recently the firm has announced plans that hint they'd like to keep that increased market share—and perhaps expand it.
Note: Auto production was up 10 percent in September 2011 compared with one year earlier as the domestic Big Three automakers continued to pick up market share.
In a closely followed round of bargaining, GM announced last Wednesday that it had reached an agreement with the United Auto Workers that would add 6,400 manufacturing payrolls to GM facilities around the country. Part of this agreement, though very unconventional, has residents of a small town about 30 miles south of Nashville very excited. It's extremely rare for auto facilities to reopen once closed, but part of the agreement reached last week will once again get gears moving at GM's Spring Hill, Tennessee, plant.
Plant history and new beginnings
The facility opened in Spring Hill in 1990, originally producing the Saturn. The plant was an economic boon for the area, causing the population of sleepy Spring Hill to grow twentyfold. However, nearly twenty years from the date of opening, the factory, like many others, began feeling the pains of the sluggish global economy. In an attempt to adapt to changing economic conditions, the plant underwent a major retooling phase in 2008 when GM transitioned from producing Saturn vehicles to a crossover SUV, the Chevrolet Traverse. However—to make a long, painful story short—it wasn't enough to save the facility, and GM announced its closure in June 2009, ironically the month that marked the official end of the recession.
Roughly 30 miles south of Nashville, the town of Spring Hill, Tennessee, is witnessing a rare occurrence: GM's auto production facility there is reopening.
In May 2009, the unemployment rate in Maury County, Tennessee, was an already-elevated 11.8 percent. With the closing of the factory doors in June 2009, the unemployment rate in the county skyrocketed to 17.3 percent. The unemployment rate has remained elevated for the county since the factory's closing. Although approximately 3,000 workers were impacted by this closure, some workers initially avoided the unemployment line as the GM plant continued to build engines for other GM cars as well as performing operations related to stamping, polymers, and providing service parts and powertrain operations.
One possible explanation for the dip in Maury County's unemployment rate (see the chart below) shortly after the plant's closing was a reallocation of labor to Lansing, Michigan, home of another GM plant where some Spring Hill employees were offered positions (thus causing a decrease in the number of unemployed, which yielded a lower unemployment rate for months following the plant's closing.). Even still, the rate for Maury County is sticking stubbornly around an unlucky 13 percent (as of August 2011, it was 12.7 percent).
Now, however, initial reports from GM estimate a new 1,700 jobs will be created at the Spring Hill facility. Of these jobs, 600 will produce one model, while another 1,100 workers would focus on the production of the second model. In an area where there were 31,190 employees working across all industries in August, there's certain to be a substantial positive impact from increasing employment by roughly 5 percent of the current number of employed people. The plant is already undergoing capital investments that suggest hiring would begin early next year.
Southeastern states hold advantage in recruiting new foreign auto plants
Southeastern states have particularly had success landing assembly plants opened by foreign automaker in the U.S., as explained in the newly released third quarter edition of the Atlanta Fed's magazine, EconSouth. By offering tax breaks, state-funded training programs and other incentives, Southeastern states have secured over half of the foreign automaker assembly plants opened in the United States since 1990. Tennessee could be viewed as a leader of the pack in automotive manufacturing strength; the state has been ranked No. 1 for the second year in a row by Business Facilities, a national economic development publication.
Evidence of this can be seen in the recent opening of the Volkswagen plant in Chattanooga as well as Nissan's lithium ion battery plant, which is currently under construction. But last week's announcement by GM has left Tennessee residents and the state's leaders excited about potential positive employment growth in the manufacturing sector from domestic automakers. At first glance, research economists familiar with the automotive industry believe the Spring Hill plant announcement of 1,700 positions could offer a total gain of 6,000 jobs to Tennessee, once an estimate of indirect job creation is included.
By Mark Carter, an analyst in the Atlanta Fed's research department, and Amy Pitts, an analyst for the Regional Economic Information Network at the Atlanta Fed's Nashville Branch
October 6, 2011 in Automobiles, Employment, Manufacturing | Permalink
TrackBack
TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a011572565d3f970b015435f1c3cf970c
Listed below are links to blogs that reference General Motors reopens Tennessee plant as it seizes market share:
Comments
09/16/2011
Silver linings around the manufacturing sector?
The Southeast manufacturing Purchasing Managers Index (PMI) for August signaled that counting out the region's manufacturing sector might just be premature. The index jumped 4.1 points over the month to reach 57.8 points, a much higher level than the national Institute for Supply Management (ISM) manufacturing survey for August, which has been hovering right at the 50-point benchmark for the last two months. (A level higher than 50 points indicates growth.) The very next day, the Atlanta Journal-Constitution ran a cautiously optimistic piece that said conditions had improved notably for some Southeast manufacturers over the month of August:
" 'Manufacturing seems to be headed in the right direction,' said Don Sabbarese, professor of economics and director of the Econometric Center [at Kennesaw State University], 'but it will take time to discern whether manufacturing will return to its higher second quarter trend or remain at its current slower pace.'
"He added that, 'Gains in the last month may signal that the big declines in June and July may not have been a trend, but a soft spot for manufacturing.' "
While data from the Southeast and national PMI surveys may disagree for the month of August, the Southeast PMI data may have been a bellwether of other manufacturing data that are now showing some silver linings for the sector. For example, take a look at the Federal Reserve Board's index of industrial production and capacity utilization released September 15: for the months of April through June, capacity utilization remained absolutely flat, possibly reflecting the temporary slump Sabbarese hinted at in the Journal-Constitution. (Remember, the tsunami struck Japan in March, but most economic data began reflecting its full effects in April.) However, for the months of July and August, capacity utilization edged up 0.3 percentage points both months, more consistent with a "slow growth" narrative than one of the sector losing steam entirely. Likewise, industrial production for manufacturers was stagnant for May and June but has increased 0.6 and 0.5 percentage points for July and August, respectively. Also just released, the New York Fed's regional Empire State Manufacturing Survey suggested improved future general business conditions for September.
What was behind this temporary summer slump, if indeed it is not a longer-term trend? Most analysts would agree the effects from the tsunami in Japan earlier this year are almost entirely phased out throughout the supply chain now, but its waning took a few months. While the data were already sagging, fiscal policy uncertainty grew and stock market volatility increased, weighing on broad economic activity that was likely reflected in manufacturing measures. Perhaps as temperatures across the South begin to cool this fall, the manufacturing sector will start heating back up.
By Mark Carter, an analyst in the Atlanta Fed's research department
September 16, 2011 in Manufacturing | Permalink
TrackBack
TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a011572565d3f970b014e8b9ac9c2970d
Listed below are links to blogs that reference Silver linings around the manufacturing sector?:
Comments
08/09/2011
The Southeast PMI: Q1 giveth, Q2 taketh away
The pace of growth in the Southeast's manufacturing sector slowed again in July, according to Kennesaw State University's (KSU) Southeast Purchasing Managers Index (PMI). The overall PMI dipped 2.9 index points over the month of July to reach 53.7 points, a level still indicating growth, but representing the slowest month for the Southeast's manufacturing sector since October 2010. The index is back to where it was around last fall, before any of us were talking about a "manufacturing-led recovery."
Components of the PMI that measure the health of manufacturers' new orders, production, employment, and commodity prices all fell in July, with the largest decline being a slide of 8 index points in the employment component. Though manufacturing employment in the Sixth District is still on the rise with a reading of 54.3 points (on a scale where anything above 50 indicates growth), the Southeast PMI indicates the momentum in manufacturing employment has, like the overall index, slowed. To vividly illustrate this, just a few months ago in April, about 45 percent of manufacturers surveyed said their employment levels had increased compared to the previous month. In July, the number was less than half of April's level.
How seriously can we take this index as an indicator for actual changes in Sixth District manufacturing employment? Below, we've plotted the KSU manufacturing employment component with actual changes in manufacturing employment (as measured by the U.S. Bureau of Labor Statistics's (BLS) state payroll employment report) across the Sixth District, the same geographic area the PMI survey covers. As you can see, the employment index correlates relatively well with actual changes in manufacturing employment. A beneficial feature for an economic analyst is that the Southeast PMI report is released around two weeks prior to the BLS's report on regional payroll employment, giving us a potential glimpse at forthcoming employment data.
In June, the Sixth District added a net total of 3,000 manufacturing jobs while the KSU employment component hovered at an elevated level of 62.3 points. Once the BLS releases its regional employment report on August 19, we'll see how the decline of 8 index points in the July KSU employment index translated into actual job growth for the sector last month.
Other highlights of the report offer contrasts of July's manufacturing health against how the sector was performing just a few months ago. New orders, a bellwether for future manufacturing activity, and production, a measure of current activity, are 11.9 points and 10.5 points below their six-month averages, respectively. The release offers some comparisons to April, a particularly good month for Southeast manufacturers:
Details of the latest BLS regional employment report (detailing June) are available.
July's data on the regional level will be available Friday, August 19, at 10 a.m.
Those interested can read more about the Southeast PMI, including details of its calculation and how to interpret the PMI.
By Mark Carter, an analyst in the Atlanta Fed's research department
August 9, 2011 in Employment, Manufacturing | Permalink
TrackBack
TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a011572565d3f970b01543462004c970c
Listed below are links to blogs that reference The Southeast PMI: Q1 giveth, Q2 taketh away:
Comments
06/09/2011
In May, national PMI falls further than Southeast PMI
Like many analysts, I read last Wednesday's purchasing managers index (PMI) report with a dropped jaw. Manufacturing is supposed to be one (if not the) sector leading the recovery, but for those who haven't heard, the Institute for Supply Management's (ISM) PMI dropped 6.9 index points to reach 53.5 in May. This level indicates a slower rate of growth than April's reading of 60.4 points. Similar drops happened to slightly lesser degrees last month in the United Kingdom, the euro zone, and China. All of these PMIs are still above the 50-point benchmark indicating growth, so it's not quite time to sound the alarms just yet, but the U.S. PMI fell particularly hard from April to May. A one-month 6.9 point drop hasn't been seen since January 1984. Data for June, to be released on July 1 for the U.S. PMI and the other economies mentioned above, will help us see if this decline was a temporary phenomenon brought on by global supply chain disruptions resulting from the disaster in Japan, or if it indicates other headwinds the recovery is facing.
Silver linings in last week's report include:
- 84 percent of contacts said their levels of new orders were better or the same as last month. Only 16 percent said their level of new orders had dropped from April to May. The new orders component of the PMI is the most forward-looking.
- Though it dropped 4.5 index points from April to May, the employment component remained at 58.2 for May. It was the highest reading of any component used to calculate the PMI.
- Produced from the same ISM survey but not included in the PMI's calculation, the prices index dropped 9 index points in May. This reading indicates that while manufacturers are still feeling rising price pressures for their inputs, their prices aren't rising as quickly as they were in April.
Back in the Sixth District...
Not surprisingly, the Southeast PMI, produced in conjunction with our friends at Kennesaw State's Econometric Center, also took a hit in May. However, it wasn't hit as hard as the national PMI. For the Atlanta Fed's Sixth District states (Georgia, Florida, Alabama, Tennessee, Mississippi, and Louisiana), the PMI fell 4.6 index points from April to reach 60.2 in May, a notably higher level than the national PMI. Here's a snapshot of how the Southeast PMI's components fared against the national PMI for May:
Why the difference?
Now and then, I get information from LexisNexis that includes a link to every story that focuses on manufacturing in the Sixth District. Of course, manufacturers in the Southeast face similar problems as manufacturers in other parts of the country (rising commodity prices have been a frequently mentioned problem recently), but here are a few regional headlines from May and early June that might explain why the Southeast PMI fared a bit better than the national one for May:
BBVA Compass: Manufacturing and exports to drive economy in 2011 (Birmingham Business Journal)
VF Jeanswear facility reopening in Holly Pond (Birmingham Business Journal)
Boeing avoids 70 planned job cuts in Macon this year (Macon Telegraph)
Yamaha boosting production in Newnan (Atlanta Business Chronicle)
Kia will expand its Ga. Plant (Autonews.com)
Nutriforce to build $5M plant (The South Florida Business Journal)
Firms increase local manufacturing capacity, add space and jobs (Orlando Business Journal)
Biovest builds cancer vaccine manufacturing site (Tampa Bay Business Journal)
Better days ahead for auto industry (Nashville Business Journal)
Chattanooga assembly plant is VW's prototype for the future (Autonews.com)
Carlisle Transportation locates in Franklin (Knoxville News-Sentinel)
More information about the Southeast PMI, including the exact wording of questions posed to participants, is available. Also, if you're a manufacturer in the Southeast, you can easily find the link on that page to sign up for the KSU-FRBA five-minute monthly survey, which entitles you to a full regional report as well as your state's report before its release to the press each month.
By Mark Carter, an analyst in the Atlanta Fed's research department
June 9, 2011 in Manufacturing | Permalink
TrackBack
TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a011572565d3f970b014e890719df970d
Listed below are links to blogs that reference In May, national PMI falls further than Southeast PMI:
Comments
05/12/2011
Manufacturing's ups and downs
You don't have to look hard these days to find a feel-good article about the resurgence of the U.S. manufacturing sector, and with reason: manufacturing is the strongest sector of the U.S. economy. While the economy grew 1.8 percent as a whole in the first quarter of this year, manufacturing shipments grew by over 5 percent while orders for manufacturing goods grew over 7 percent in the first quarter. Capital-intensive firms such as Caterpillar, the world's largest maker of earthmoving equipment, recently announced first-quarter earnings far above Wall Street expectations, and General Electric, the largest industrial group in the United States, announced a couple of weeks ago its outlook for growth is "very strong" Atlanta Fed chief Dennis Lockhart recently said the economic recovery was partially attributed to a rebound in manufacturing employment and production.
What's interesting, though, is that this manufacturing recovery is taking shape differently across the nation, with employment returning at varying velocity, differing by region. The Midwest/ Rust Belt is rebounding fastest employment-wise (led by Michigan), while the South mostly continued to shed manufacturing jobs, comparing the first quarter of 2010 to the first quarter of 2011. But the worst area tends to be the Northeast, where states like New York and New Jersey are faring worse in manufacturing employment than they were even in the first quarter of last year.
First, we should not take this chart into consideration solely for a full picture on manufacturing employment. While, yes, Michigan has added 27,400 manufacturing jobs to its payrolls over one year, it's critical to keep that in the context of the total number of jobs lost. (Hint:The losses are way more than this chart shows being added.) In December 2007, when the National Bureau of Economic Research marked the official recession's beginning, there were about 613,000 manufacturing employees in the state of Michigan. That number as of March 2011 is around 488,000. Given Michigan's embedded manufacturing infrastructure and large number of unemployed, skilled workers, it stands to reason that the state would be able to regain jobs faster than other states. It also helps that the big domestic automakers are doing well lately: Ford Motor Company recently announced its highest first-quarter earnings in 13 years.
Back in the Sixth District…
Georgia stands out in the South: it added about 6,400 jobs from the first quarter of 2010 to the first quarter of 2011, and while the gains in Louisiana have been small—500 jobs—at least it's in positive territory. All other Sixth District states are in the red—TN, LA, MS, and AL. What's going on in Georgia? And why are the other Sixth District states seemingly lagging behind in manufacturing employment?
One explanation is faster-than-average job growth along the I-85 corridor through West Point, Ga., and La Grange, Ga.
Kia Motors has definitely brightened the manufacturing employment outlook in southwest/west-central Georgia. Two weeks ago, the firm announced it would be accepting applications for 1,000 new positions as it gears up to begin production on the Optima, a midsize sedan. Production on the model will begin in the third quarter of 2011. These 1,000 new positions will be in addition to the 2,200 employees already at the facility. The Hyundai plant just across the state line in Montgomery, Ala., is also boosting employment for parts suppliers in Georgia. These two auto plants together have resulted in 7,000 indirect jobs in the parts-supplying business.
Feeling the multiplier effect from all of this new capital investment, tax revenues, and additional employment, the southwest/west-central region of Georgia is feeling spin-off growth in other sectors, public and private, including a new Wal-Mart distribution center. Columbus State University is also opening a branch campus in West Point, while Atlanta Christian College has plans to move there next year. West Point's mayor was recently cited as saying that since Kia opened its doors there, 38 new businesses have opened. Another plus for manufacturing employment in Georgia is the Center for Innovation for Manufacturing, based at Lanier Technical College. This center, along with a program called Quick Start, was responsible for retraining laid-off mill workers for production at the West Point Kia plant.
What about the other Sixth District states?
I was particularly surprised to see Tennessee in the red, after having read several headlines that talk of the Volkswagen plant in Chattanooga, new parts suppliers, Nissan's battery production facilities, etc. But as our neighbors at the St. Louis Fed show here, several years of losses in manufacturing employment will take a while, if ever, to be made up in Tennessee. However, if you look at Tennessee employment year over year, you can see the state's beginning to make some net job additions compared to a year ago. Mississippi is not as fortunate to date, as plant closings and downsizings continue to outpace job creation. Manufacturing employment in Mississippi over the first quarter of this year shed in the range of about 2 percent to 2.5 percent each month.
Alabama is down about 300 manufacturing jobs comparing the first quarter of 2011 with the first quarter of 2010, but comparing March 2011 with March 2010, it's actually up about 800 jobs. Alabama is also feeling some of the economic impact of the I-85 corridor expansions and anticipates new positions opening up at its Lincoln, Ala., Honda facility. Within the state, northeast Alabama lost about 1.7 percent of its manufacturing employees over the last 12 months, while southeast Alabama has added about 1.4 percent to its pool of manufacturing workers.
Florida lost about 2.9 percent of its manufacturing jobs from March 2010 to March 2011. Florida's manufacturing sector is based largely on electronics manufacturing, printing and publishing, and fabricated metals manufacturing, industries which have had less-than-desirable employment dynamics over the last year. For a silver lining, Tom Dubin, president of Manufacturers' News, recently had this to say:
"Florida's industrial sectors continue to be affected by the housing bust and the recession. However, losses have slowed considerably, and the state's investments in innovative technologies are helping the recovery take hold."
We'll keep watch for next week's regional employment report for an update.
By Mark Carter, an analyst in the Atlanta Fed's research department
May 12, 2011 in Employment, Manufacturing | Permalink
TrackBack
TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a011572565d3f970b01543244354b970c
Listed below are links to blogs that reference Manufacturing's ups and downs:
Comments
Posted by:
steel fabrication |
09/10/2011 at 03:47 AM
04/14/2011
Surveying manufacturing's role in the U.S. economy
Last week, Atlanta Fed President Dennis Lockhart delivered a speech on U.S. manufacturing to the Knoxville Economics Club. In the speech, he discussed the manufacturing sector's role in the economic recovery. Among the points President Lockhart made were the following:
| • | Part of the economic recovery is attributable to the relatively strong rebound in manufacturing production and employment from the depth of the recession. In 2010, both production and manufacturing employment outpaced growth in the rest of the economy. |
| • | Increased demand for U.S. manufactured goods abroad is also acting as a shot in the arm for the sector. Last year, the net exports component of the gross domestic product (GDP) formula made its largest contribution to GDP growth since World War II. |
President Lockhart also addressed some growing concerns regarding the U.S. manufacturing sector but, to paraphrase a line from Twain, Lockhart said that in his opinion, rumors of the death of U.S. manufacturing have been greatly exaggerated.
Below are some additional insights regarding the concerns President Lockhart addressed as well as some information about manufacturing in the Sixth District.
| Concern: | Manufacturing is a decreasing source of employment in the United States. |
| Response: | Not even the most optimistic analyst could refute that manufacturing represents a gradually decreasing share of employment in the United States. This decrease has been a long-term trend since the 1950s. Chart 1 shows the share of all U.S. jobs accounted for by the manufacturing sector. In the 1950s, one in three employed Americans worked in the manufacturing sector. That figure today is now down to less than one in ten. Why? Much of the answer lies in the greatly increased productivity of manufacturing firms since the 1950s. Gains in per-worker output in manufacturing have greatly exceeded those in the overall business sector just about every year data have been collected for this series. |
| Concern: | The United States doesn't actually make anything anymore. |
| Response: | Oh yes, we do. Manufacturing output represents 11 percent to 12 percent of the U.S. economy in terms of real GDP. This share has remained constant for several decades. Manufacturing output's share of nominal GDP is ticking down over time because the relative prices of things we make get cheaper over time as we make them more efficiently. Adjusting for the relative change in price, we see the manufacturing sector's output has remained a critical piece of the U.S. economy. |
What we make has changed, though, and the overall health of manufacturing depends heavily on the type of manufacturing in question. Take a look at the Federal Reserve Board's indexes for the production of three industries: apparel and leather goods, computers and electronic products, and fabricated metals (see chart 3). This chart tells quite a story. We're making more than we used to of some things (computers/electronics), and less than we used to of other things (apparel/leather goods). Some manufacturing industries feel the effects of the business cycle but haven't changed that much over time at all (fabricated metals, for example).
| Concern: | Chinese manufacturing is putting U.S. factories out of business. |
| Response: | While China is definitely growing rapidly and increasing its share of global manufacturing output in the process (see chart 4), the United States remains the largest manufacturing country in the world, providing about 20 percent of the entire world's manufactured goods. We're not, however, the world's largest exporter of manufactured goods. China takes the cake there, followed by Germany. (The United States is third, though our exports of services are often understated, as discussed in this article from The Economist.) Recent efforts have been made to form a more modern and comprehensive export strategy. So the United States does export goods. In fact, the US-China Business Council recently announced that the state of Georgia alone exported more than $2.4 billion in goods and services to China last year. Also, from 1999 to 2010, U.S. sales to China grew by 468 percent. |
Back in the Sixth District…
Some fresh regional manufacturing data also came out last week: our friends at the Kennesaw State University Econometrics Center released the March Southeast Purchasing Managers Index (PMI) report. The Southeast's manufacturing sector is roughly on par with that of the nation as a whole. New orders, production, employment, and inventories all reportedly expanded for Southeast manufacturers over the month of March (see chart 5), but growth in new orders and production cooled off a bit (down 3.9 index points and 1.6 index points, respectively). Relatively small declines in the PMI like the one for March (down by 0.4 index points) are not troubling signals, as long as the index hovers above 50 points, the index's benchmark for growth. Overall, the Southeast PMI, like the national PMI, remains at elevated levels. March's Southeast PMI was 64.4.
By Mark Carter
an analyst in the Atlanta Fed research department
April 14, 2011 in Manufacturing | Permalink
TrackBack
TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a011572565d3f970b014e87cce217970d
Listed below are links to blogs that reference Surveying manufacturing's role in the U.S. economy:
Comments
03/10/2011
Manufacturing momentum: Growth accelerates in the Southeast
Data released from Kennesaw State University's Econometric Center this week reflected a growing manufacturing sector across the Southeast. Large jumps in the new orders, production, and employment indexes raised the overall index 5.9 points to reach 64.8.
The new orders component added 9.8 index points to reach 70.8, a particularly elevated level, a result of 53.3 percent of respondents indicating that their level of new orders had improved compared with the previous month. The percentage of contacts reporting higher levels of orders has been increasing now for five months.
Production also saw impressive gains. The component gained 11.9 points in February's index to reach 70. On top of the increase in current levels of production noticed in February, nearly two-thirds of contacts reported expected future increases in production levels in the near term.
While the production and new orders indexes saw more impressive gains over the month, the employment component of the index is worth a behind-the-scenes look for February's release. Almost 8 percent more respondents replied that their employment level was higher in February than in January.
The price index measures changes in commodity prices paid by manufacturers. In February, the index had a higher percentage of contacts reporting that commodity prices had elevated since January (up by about 6 percent), while none said commodity prices had fallen month over month, resulting in a 2.7 index point increase in the index, which reached 85 for the month.
By Mark Carter
an analyst in the Atlanta Fed research department
March 10, 2011 in Manufacturing | Permalink
TrackBack
TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a011572565d3f970b014e5fc5cbe9970c
Listed below are links to blogs that reference Manufacturing momentum: Growth accelerates in the Southeast:
Comments
02/09/2011
Regional input cost, manufacturing indicators rise in January
The Econometrics Center at Kennesaw State University released its monthly Purchasing Managers' Index (PMI) report on manufacturers across the Sixth District this week. In January, the Southeast PMI continued its upward trend as Sixth District manufacturers hinted at a slightly brighter current economic picture and expressed an improving outlook.
Rising input costs were also reflected in the Southeast PMI's Commodity Prices component, which read 82.3 in January. Yet, as the Atlanta Fed's most recent Beige Book contribution noted:
"A majority of business contacts indicated that current cost pressures remained high, citing increasing material prices and rising labor and benefits outlays. However, most firms remained reluctant to pass input cost increases through to consumers given intense competitive pressures."
Atlanta Fed President Dennis Lockhart discussed the topic in his recent speech in Anniston, Ala.:
"And because movements of commodity and other 'headline' prices seem to be creating the impression in the popular consciousness of a growing inflation problem, I would like to give particular attention today to inflation."
Speaking specifically about his view on inflation, President Lockhart noted:
"What we're searching for is the underlying inflation trend that the FOMC [Federal Open Market Committee] statement talks about and which we want to control. And since an exact fix on the state of inflation is elusive in the short run, the best policy approach, in my opinion, is to pursue a low, but positive rate of inflation over the longer term. As a policymaker, I think of the desirable level of inflation as high enough to provide a cushion of safety against the risk of tipping into deflation but low enough to be largely irrelevant—not a consideration—in long-term decision making. For me, this number is around 2 percent.
"Notwithstanding the energy-driven jump in prices in December, underlying inflation is currently below the level that I would define as price stability. My current projection shows underlying inflation gradually rising over the next few years, putting us back into a range consistent with the 2 percent target by 2013. Key to the realization of this inflation forecast is that inflation expectations of the public remain well anchored. And for this to happen, the public has to have a good appreciation of what the central bank is trying to achieve and have adequate faith that we will achieve it."
On manufacturing
The overall Southeast PMI as measured by our friends at KSU increased 2.5 points in January, putting the index at 58.9. The national PMI gained just a little less than the regional PMI in January (rising 2.3 points) to reach 60.8.
Both the regional and national indicators have taken a relatively sharp upward turn over the last couple of months, but the Southeast PMI remains on the heels of the national PMI, in their aggregate forms and in most underlying variables.
Though it continues to lag behind the national measure, the new orders index for manufacturers in the Southeast has seen significant upticks over the last few months. As new orders are a leading indicator, this upward movement is encouraging for future production levels. Also noted in the latest report, 63 percent of survey participants across the Southeast said they had plans to increase production levels in the next three to six months, up from 54 percent reporting plans to increase near-term production in December 2010.
Several other Federal Reserve Banks produce monthly manufacturing surveys that yielded similar results as the KSU PMI survey for January. Higher aggregate indices and particularly higher levels of new orders were noticed in the New York Fed's Empire State manufacturing survey (where data is indexed to 0 instead of 50), and the Philadelphia Fed's manufacturing survey, where the new orders index jumped 13 points. Future expectations for new orders were also higher in most regional surveys. Half of respondents in the Kansas City Fed's manufacturing survey indicated they expect new orders to continue increasing over the next six months.
By Mike Chriszt, an assistant vice president in the Atlanta Fed's research department,
and Mark Carter, an Atlanta Fed research analyst
February 9, 2011 in Inflation, Manufacturing, Prices, Southeast | Permalink
TrackBack
TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a011572565d3f970b0148c87cf154970c
Listed below are links to blogs that reference Regional input cost, manufacturing indicators rise in January:
Fabrication, when used as an industrial term, applies to the building of machines, structures and other equipment, by cutting, shaping and assembling components made from raw materials.