Southeast Manufacturing Activity Falls for 3rd Consecutive Month

Donald Sabbarese

Thursday, August 7th, 2014

Manufacturing activity in the Southeast continued to slow for July, according to the Southeast’s Purchasing Managers Index (PMI) report released today by Kennesaw State University’s Econometric Center in the Michael J. Coles College of Business. The Southeast PMI decreased 4.0 points to 51.3, while the National PMI increased 1.8 points to 57.1. 

This is the third consecutive drop in the regional monthly index, according to Don Sabbarese, director of the Econometric Center at Kennesaw State. According to the July report, only 26 and 28 percent of respondents reported higher new orders and production compared to the previous month. 

The July Southeast PMI recorded lower readings than the National PMI for new orders, production and finished inventory, and higher readings for employment and supplier delivery time than the National PMI.

Six Southeastern states — Alabama, Florida, Georgia, Louisiana, Mississippi, and Tennessee — are included in the Econometric Center’s monthly regional report. Two states — Georgia and Tennessee — recorded lower PMIs.

“Southeast manufacturing’s current new orders and production weakness suggest that the current downward trend for the PMI will continue, except for employment and finished inventory’s improved readings of 1.9 and 4.7 points,” Sabbarese said. “Employment and finished inventory would normally fall after a three-month drop in new orders and production. That said, the increase in employment suggests that new orders will not continue to decrease in the future and 42 percent of respondents expect production to increase in the next three to six months, up from 27 percent in June.”

Highlights of the July Southeast PMI include: 

  • New orders decreased 14.2 points to 45.3, based on decreases for Georgia, Louisiana, Mississippi and Tennessee
  • Production decreased 8.5 points to 48.1, based on decreases for Georgia, Louisiana, Mississippi and Tennessee
  • Employment increased 1.9 points to 60.4, based on increases for Alabama, Georgia and Mississippi
  • Supplier delivery decreased 3.8 points to 55.7, based on decreases for Alabama, Florida, Georgia  and Tennessee
  • Finished inventory increased 4.7 points to 47.2, based on increases for Alabama, Florida, Louisiana and Tennessee
  • Commodity prices decreased 0.9 of a point to 57.5, based on decreases for Alabama, Florida, Louisiana and Tennessee 

The Southeast PMI reading is a composite of five variables — new orders, production, employment, supply deliveries and finished inventory. A sixth variable, commodity prices, is compiled by the Coles College’s Econometric Center but does not go into the PMI calculation.