In February, Federal Reserve manufacturing indices caught up with the Institute for Supply Management (ISM) national manufacturing index. Among other regional manufacturing measures, the New York Fed's Empire State Manufacturing Survey showed general business conditions improving strongly in February. The Philadelphia, Kansas City, and Richmond Feds' manufacturing indices also showed overall improvement from January to February.
The Kennesaw State University Purchasing Manager Index (PMI), produced in conjunction with the Atlanta Fed, was no exception; however, this measure saw the largest increase of the previously mentioned indices. As recently as last month there was a growing gap between the national ISM PMI and the regional PMI. Data from the February survey, though, show the gap has closed.
In February, four out of five equally weighted components used in calculating the index saw double-digit gains. Most notably, the new orders and production components shot up 10.8 and 13.6 index points, respectively. Also, the employment component jumped 11.9 index points to reach 53.3, above the index's 50-point threshold indicative of growth. Inventories reached relatively neutral territory at 50.7 index points.
The new orders component rose because 9.2 percent more respondents (now roughly half of the total respondents) noted that orders were higher in February than in January. The increase in production is the result of 13.5 percent more respondents reporting increased levels of production in February.
In response to the prompt: "The level of employment at my plant/division/company last month was ___," 14.5 percent of all contacts reported higher levels of employment in February (a 9.5 percentage point increase from January), while 77.6 percent reported similar levels as in January. With regard to inventories, exactly 25 percent of contacts reported higher inventories than the month prior, while roughly 50 percent reported similar levels of inventory from January to February.
Of course, one month does not a trend make. Subsequent reports will show whether the February increase is sustainable.
By Mark Carter, an economic analyst in the Atlanta Fed's research department