Like the rest of the nation, manufacturing in the Southeast continued expanding at a faster pace in April. The Southeast purchasing manager index (PMI) rose 3.4 index points to reach 63.3 based on gains in every component except for the employment index, which nevertheless remains in expansion territory.
Respondents reporting higher new orders were up by 11.6 percent in April compared with March, causing the new orders component to rise 11.1 index points to 78.3, a new high for the series, which began in 2006. (Both February and March's new orders indices were also series highs.) In April, 64.5 percent of respondents reported higher levels of new orders across the Sixth District, while 27.6 percent reported order levels similar to those in March. Only 7.9 percent reported lower levels of orders.
The production component also had significant gains in April, with 53.9 percent of respondents reporting higher production levels for the month, while 38.2 percent of respondents indicated production levels similar to those in March. Production set a series high in April, gaining 3 index points and reaching 73.
Manufacturing employment grew at a slower pace in April than in March, according to the survey; the employment index lost 1.2 index points for the month, but at 55.3 was still firmly in expansion territory. This level was consistent with U.S. Bureau of Labor Statistics' April Employment Situation Summary, which showed the manufacturing sector adding 44,000 jobs for the month across the nation. (Among those April gains were 9,000 jobs in fabricated metals, 7,000 jobs in machinery, and 14,000 in nondurable goods production.) The regional employment component has lagged the national Institute for Supply Management's manufacturing employment component; however, the Southeast PMI employment index has been in expansion territory since February.
Several regional and national data now point at an inventory expansion trend for manufacturers. In April, 75 percent of Southeast PMI respondents indicated inventories were at the same level or greater than they were in March. The regional index of manufacturing inventories has hovered around the 50-point benchmark expansion for the previous three months.
Again on the national level, the U.S. Census' manufacturing and trade inventories and sales data reported a lower manufacturing inventories/sales ratio for March (1.27). This ratio was as a result of manufacturer's sales rising 2.2 percent in March, faster than inventory growth, which was 0.3 percent for the month. This growth echoes the Southeast PMI's strong production and inventory figures for April.
As we watch lagging data come in, it will be interesting to see if the recent disasters in the Sixth District will be reflected in the Southeast PMI. No doubt, New Orleans and Nashville are both important manufacturing and trade centers for the region. April data, however, put Tennessee at the top of the district in terms of PMI at 65.3, with Louisiana at 58.9.
By Mark Carter, an economic analyst in the Atlanta Fed's research department