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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.



Tennessee's Economic Forecast? Not Too Bad

The Center for Business and Economic Research (CBER) at the University of Tennessee recently published its spring 2013 economic outlook for the state of Tennessee, and all things considered, the outlook’s not too bad. Considering the deep recession and meek recovery we have endured over the last six years, some might even call it rosy.

CBER conducts research on national and state economic trends. Report findings are used not only by the University of Tennessee but also by state government and other public and private entities. Dr. William F. Fox heads the center as director, along with associate director Dr. Matthew Murray. The center has provided an economic report to the governor every year since 1975, and these reports serve as the official forecast for the state.

Diving into the report, one will encounter modest expectations for economic growth. However, encouraging tidbits can be found in Tennessee’s recent performance, and there are encouraging signs in the outlook for the Volunteer State, which an earlier SouthPoint post mentioned. Overall, Tennessee’s economy in 2012 was the best year since the onset of the Great Recession. The outlook for employment gains through 2014 is a humble 1.8 percent. Nevertheless, the state should still outpace job growth for the nation. In a recent USA Today article, Tennessee ranked ninth on a list of states with the fastest-growing economies, which should bode well for a continued gradual lowering of the unemployment rate through 2015.

Indications also point to tangible and stable momentum in the residential housing sector. The state has experienced 22 consecutive months of year-over-year increases in single-family permits through May 2013. Further evidence that the housing outlook is improving is the 12.1 percent year-over-year increase in the state’s realty transfer tax in April. Housing may finally be gaining some traction, which would be a welcome relief from the historically low levels of activity endured over the last five years.

Nominal personal income growth in Tennessee eclipsed the national average in 2012 growing at 3.9 percent compared to 3.6 percent. Personal income growth took a hit during the first quarter of 2013 as a result of the expiration of the payroll tax holiday. As economic conditions strengthen, it is expected that 2014 will see personal income grow at a 4.4 percent rate.

Summing up CBER’s outlook for Tennessee, expectations are for a modest slowdown in the third quarter of 2013, with growth picking up steam toward the end of the year. Economic growth should persist through 2015, including a 1.7 percent increase in employment in 2013 and a 1.8 percent increase in 2014. Manufacturing employment will continue to grow by 1.6 percent through 2015. The unemployment rate is expected to level out at 7.8 percent by year-end and at 7.5 percent by 2014.

OK, maybe not rosy, but not too bad, either!

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

July 9, 2013 in Economic Growth and Development, Forecasts, Tennessee | Permalink


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Southeast PMI

The manufacturing sector is a large and economically important piece of the regional economy, making up 10.8 percent of nominal gross domestic product for the states of the Sixth District in 2008. By looking deeper into manufacturing data, we gain insight not only into current production, but into the likely path of near-term output as well. Continued increases in new orders for manufactured goods, for instance, should lead to increased capacity utilization and employment. In the current economy, economic indicators pertaining to manufacturing deserve close monitoring. An important regional manufacturing indicator is the Southeast Purchasing Managers Index (PMI).

The Southeast PMI has been on an interesting ride throughout the current recession. This valuable economic indicator is produced and managed by Kennesaw State University's Econometric Center with the cooperation of the Atlanta Fed's Research Department, assists economists and business leaders in taking the temperature of the manufacturing sector, and helps them plan accordingly. Each month, a survey is sent to manufacturers across the Sixth District asking participants to compare new orders, production, employment, deliveries, finished good inventory levels, and commodity prices with levels from the month prior. Responses are then weighted and indexed to give an accurate and timely snapshot of manufacturing activity in the Southeast. Index readings above 50 index points show that the respective component is expanding while readings below 50 reflect contraction.

Like the national PMI, the Southeast PMI hit bottom in December 2008, reaching a low of 25.8, compared with the national PMI's low of 32.9. Though the Southeast figure dipped lower, it returned to normal levels more quickly, barely breaking the 50-point threshold in May 2009 to reach 50.2.

For its August and September readings, the Southeast PMI lagged the national PMI by about 6 index points. The Southeast PMI for September was 46.7, up 0.5 index points from August, compared with a national PMI September reading of 52.6.


The Southeast PMI has several components that are also indexed and useful for gauging the regional manufacturing economy. Along with the headline PMI, new orders, production, and finished goods inventories all bottomed out in December 2008, with new orders and production reaching above 50 in May 2009. July 2009 brought a surge for many Southeast PMI components. In July 2009 alone, production jumped 13.4 index points and new orders gained 4.5 index points, but the trend may not be a lasting one. As of the September release, new orders, production, and finished goods inventories had all contracted.


Another interesting component watched by many economists is the inventory component. Consistent with national PMI figures and U.S. census reports, the Southeast PMI shows manufacturing inventories are not rebuilding as quickly in this recession as they have in several postwar recessions. Nationally, this recession’s manufacturing inventories are most similar to the 2001 recession. The chart below reflects the national trend for manufacturing inventories in the current and previous four recessions.


Participants in the Kennesaw State PMI survey receive a state and regional report on PMI near the beginning of each month. To learn more about the process, to see a survey form, or to begin participating, click here.

By Mark Carter, an economic research analyst in Atlanta Fed's research department

October 14, 2009 in Forecasts, Manufacturing, Southeast | Permalink


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There's a lot to LEARN

When the Atlanta Fed set out to improve its understanding of the Southeast economy, one thing that became immediately apparent was that we could not hope to field a staff of experts on every area in the region. Clearly, there are vast differences between the economies of south Florida and north Georgia, between east Tennessee and west Mississippi. And New Orleans, well, that's a world unto itself! So we set out to find experts on local economic conditions, and we found a bunch. Most are located in university-based business and economic research centers, and a list can be found on our Web site.

Many of these centers are also part of the Association for University Business and Economic Research (AUBER), which is the professional association of business and economic research organizations in public and private universities.

We called our network "LEARN," which stands for Local Economic Analysis and Research Network. Our goal was not to establish a formal organization, but an informal network of local economic experts throughout the region. We held a conference in September 2008 in New Orleans and will meet again in 2010. The real benefit of these relationships is the information we gather on local conditions throughout the year as well as insight into larger trends in the broader economy.

Most of the centers that are in the LEARN network produce regular commentary and hold conferences that focus on regional economic developments and outlooks. For example, the University of Alabama's Center for Business and Economic Research publishes a quarterly newsletter titled "Alabama's Business," which includes an overview of economic conditions in the state as well as an outlook. In addition, they held a midyear economic update conference in July 2009.

Many centers also produce unique economic measures of local activity. For example, Kennesaw State University's Econometric Center produces a monthly purchasing managers index (PMI) for the state of Georgia and for the Southeast region. The regional PMI can be compared to the Institute for Supply Management's National PMI index to compare regional manufacturing trends to those developing at the national level.

We tap our LEARN members directly for insight into some of the questions we are trying to answer here at the Atlanta Fed. For example, when some national economic data began showing signs of improvement, we approached our network in the late spring and asked if they were seeing an increase in economic activity in their areas. The overwhelming response was that conditions remained very weak but appeared to be stabilizing. A number of the respondents also shared their belief that the economy would turn around in the second half of the year.

This information provided some additional perspective and helped in developing our opening sentence to the June Beige Book, which read, "Sixth District business contacts reported that economic activity continued to contract in late April and May, although the pace of decline had moderated in some industries and most noted that their outlook had improved."

More recently most of our LEARN members shared their belief that while economic conditions were turning, they expected only a modest recovery.

Finally, LEARN members are frequently cited in press reports, offering commentary with regard to economic developments at the local, state, regional, and national levels. My recent favorite comes from Sean Snaith, director of the University of Central Florida's Institute for Economic Competitiveness. He said in a June interview on National Public Radio that people should "forget the V-shape or other letters that economists talk about when they describe the economy. This will be a 'gravy boat recession' with a steady and gradual recovery. After touching bottom in the third quarter of 2009, we'll see GDP slowly climb like a gravy boat's spout." Who said economists can't be colorful?

I hesitate to highlight only a few members of our LEARN network because they are all doing very interesting work and are making significant contributions in the field of economic research and analysis. Fully understanding local economic developments and conditions would be impossible without them. We invite you to visit their Web sites—I promise you, there is indeed a lot to LEARN.

By Michael Chriszt, an assistant vice president in the Atlanta Fed's research department

August 19, 2009 in Economic Growth and Development, Forecasts, Local Economic Analysis and Research Network (LEARN) | Permalink


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Why SouthPoint?

Welcome to SouthPoint, the Atlanta Fed's new weekly blog on regional economic developments. In this blog, we'll focus on the states in the Sixth Federal Reserve District—Alabama, Florida, Georgia, Louisiana, Mississippi, and Tennessee—a very economically diverse area of the country.

One of the regional Federal Reserve banks' roles is to gather and process regional economic information to help inform the Fed's monetary policy process. The president of the Federal Reserve Bank of Atlanta is a member of the Federal Open Market Committee (FOMC) and as such plays a role in deciding the direction of certain interest rates. In gathering regional economic intelligence to assist our Bank president in his role as a member of the FOMC, we gain a deep understanding of what is happening in our district.

With that information as background, I should make another distinction up front. That is, the mission of the Atlanta Fed does not include being experts in regional economics. Our mission, as laid out in the Federal Reserve Act, specifies that the FOMC should seek "to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates." The Fed's mandate is for the U.S. economy as a whole, not the regional economy. We feel that the actions we take to meet the mandate put us in a position to offer educated commentary on economic developments in our region.

To that end, a little more than a year ago we launched the Regional Economic Information Network, or REIN, to provide an enhanced structure for handling incoming information and process it into useful economic analysis. "In our monetary policy role, we collect and analyze data covering various industries and indicators within the Sixth District," said John Robertson, vice president and then regional research team leader at the Atlanta Fed in announcing the initiative. "Sharing information helps to better position the Atlanta Fed as a knowledge source. At the end of the day, our objective is enhanced understanding of the economy. More information leads to more informed decision making."

Our REIN activities are geared toward "more informed decision making," as John put it, in relation to our FOMC-related duties. His reference to "sharing information" is what SouthPoint is all about. Please also look to the REIN section on this Web site for regular analysis of recent economic developments in the region.

So, what is so special about the Southeast region? What leads us to believe that what we learn about economic developments here is so useful when developing a picture of the national economy as a whole? After all, when the Atlanta Fed's President Dennis Lockhart goes to FOMC meetings, his policy decisions are not based on what he thinks is best for the region but what he believes is in the best interest of the U.S. economy as a whole.

Well, for starters, the states of the Sixth Federal Reserve District account for a substantial proportion of total U.S. economic output and employment. What happens in this region has a large impact on national economic trends.

Table 1 shows that if the Sixth District were an independent country, it would have the world's eighth-largest economy.

Table 1

In addition, the structure of the Southeast economy is very similar to the U.S. economy as a whole. Table 2 shows the share of gross domestic product (GDP) by industry for the combined states of the Sixth District and the United States as a whole. Except for durables manufacturing, where the Southeast is below the U.S. percentage, and construction as well as leisure and hospitality, where the region is above the U.S. concentration, the industrial structure of this region's economy is very similar to that of the national economy.

Table 2

In other words, the Southeast economy is very big, and it's structured a lot like the U.S. economy as a whole. Therefore, the picture we paint through data analysis and talking to decision-makers throughout our region puts us in a pretty good position to advise our Bank's president on broader U.S. economic developments—which is directly tied the to Fed's mandate.

It is this information and insight that will be the focus of SouthPoint, and we hope you find our posts interesting and informative.

By Michael Chriszt, an assistant vice president in the Atlanta Fed's research department

August 12, 2009 in Economic Growth and Development, Forecasts | Permalink


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