Manufacturing activity in the Southeast is still growing at a healthy level in spite of its first decline in the last three months, 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 3.4 points to 59.8, while the National PMI gained less than a point to 55.4. A PMI reading above 50 indicates that manufacturing activity is expanding; a reading below 50 indicates it is contracting.
May’s new orders and production remain at strong levels of 69.6 and 67.4, respectively, which should continue to support growth for manufacturing, according to Don Sabbarese, director of the Econometric Center at Kennesaw State. Despite slight drops in new orders and production for May, the largest decrease for the Southeast PMI components was finished inventory, with a drop of 7.6 points.
“The April to May PMI drop should not be a concern since the drawdown in finished inventory of 7.6 points accounted for much of the drop in the PMI. That decrease in finished inventory, given the strength for new orders and production, is a good indication that manufacturers will increase production to rebuild this lower level of inventory,” Sabbarese said.
Six Southeastern states — Alabama, Florida, Georgia, Louisiana, Mississippi and Tennessee — are included in the Econometric Center’s monthly regional report. Three states — Alabama, Florida and Mississippi — recorded higher PMI readings for May.
Highlights of the May Southeast PMI include:
- New orders decreased 2.8 points to 69.6, based on decreases for Florida, Georgia and Tennessee
- Production decreased 0.7 of a point to 67.4, based on decreases for Florida, Louisiana and Tennessee
- Employment decreased 0.8 of a point to 63, based on decreases for Florida, Georgia, Louisiana and Mississippi
- Supplier delivery decreased 5.2 points to 57.6, based on decreases for Georgia, Louisiana, Mississippi and Tennessee
- Finished inventory decreased 7.6 points to 41.3, based on decreases for Georgia, Louisiana, Mississippi and Tennessee
- Commodity prices decreased 0.7 of a point to 68.5, based on decreases for Alabama, 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.