The return of fall has not cooled down manufacturing in the Southeast. The Southeast Purchasing Managers Index (PMI), which was released October 5, indicated expansion in the manufacturing sector for the ninth consecutive month.

The Atlanta Fed's research department uses the Southeast PMI to track manufacturing activity in the Southeast. The Econometric Center at Kennesaw State University produces the survey. It provides an analysis of current market conditions for the manufacturing sector in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The PMI is based on a survey of representatives from manufacturing companies in those states and analyzes trends concerning new orders, production, employment, supplier delivery times, and inventory levels. A reading above 50 points indicates that manufacturing activity is expanding, and a reading below 50 points indicates that activity is contracting.

The Southeast PMI fell slightly to 55.0 points in September. The index was only 1.7 points lower than August and still solidly above the 50 threshold for expansion (see the chart). The new orders subindex registered a nice increase, and the employment subindex rose, but all other subindexes fell during the month.

  • New orders: The new orders subindex increased 4.5 points over August's levels and has now climbed 15.7 points during the last two months.
  • Production: The production subindex decreased. September's 59.0 reading was 1.2 points below August but was still well into expansionary territory.
  • Employment: The employment subindex inched up 0.5 points compared with the previous month. The employment subindex has now indicated expansion for 12 consecutive months.
  • Supply deliveries: The supplier deliveries subindex declined 3.6 points during September, indicating that manufacturers are receiving their inputs slightly more quickly.
  • Finished inventory: The finished inventories subindex decreased 8.6 points compared with August. The fall completely reversed the previous month's gain of 8.4 points. The subindex is now below 50, implying that purchasing managers are not as concerned about a buildup of inventory levels.
  • Commodity prices: The subindex measuring input price pressures moved down to 53.0, a 5.3 point drop from the previous month.

Se-purchasing-manager-index

Optimism among purchasing managers continued to rise during September. When asked for their production expectation over the next three to six months, 50 percent stated that they expect production to be higher, an increase from 44 percent in August. Only 18 percent of survey respondents expect their production to be lower.

The rise in new orders and strong production numbers bode well for manufacturing heading into the fourth quarter. The Southeast PMI has averaged a 56.6 reading so far this year. Conversely, the national PMI (produced by the Institute for Supply Management) has averaged 55.2. (I should note that the Southeast PMI is not a subset of the national index.) We'll be on the lookout for any changes in activity. After all, it's fall—the season of change.

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