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