COVID-19 RESOURCES AND INFORMATION: See the Atlanta Fed's list of publications, information, and resources; listen to our Pandemic Response webinar series.

Economy Matters logo

About


The Atlanta Fed's SouthPoint offers commentary and observations on various aspects of the region's economy.

The blog's authors include staff from the Atlanta Fed's Regional Economic Information Network and Public Affairs Department.

Postings are weekly.


September 17, 2015

Southeast Manufacturing Slows in August

Em_sp_manufacturing

Southeast manufacturing activity had been fairly sturdy this year, according to the Southeast Purchasing Managers Index (PMI). The PMI averaged a healthy 56.2 reading from January through July and, with the exception of one subpar month, new orders and production levels had been robust. However, the latest report indicated that factories pumped the brakes in August. According to the August report, new orders and production both slowed significantly.

The Atlanta Fed's research department uses the Southeast PMI to track manufacturing activity in the region. The Econometric Center at Kennesaw State University produces the survey, which examines 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. An index reading above 50 indicates that activity is expanding, and a reading below 50 indicates that activity is contracting.

The overall PMI declined 5.5 points from July and now stands at 48.8 (see the chart). The August report marks the first month the overall index has been below the 50-point threshold since November 2014. The most disconcerting aspects of the report centered on the month-over-month declines in the new orders, production, and employment subindexes.

  • The new orders subindex fell 7.1 points from July to a reading of 49.1.
  • The production subindex dropped 15.2 points from the previous month to a reading of 49.1.
  • The employment subindex declined 6.3 points to a reading of 50.0, which indicates no change in employment levels at Southeast factories.
  • The supplier deliveries subindex increased 3.6 points to 50.9.
  • The finished inventory subindex decreased 2.7 points to 44.6.
  • The commodity prices subindex fell 10.7 points and now reads 34.8.

Southeast-purchasing-managers

On its own, the fall in the Southeast PMI is nothing to get too worked up about. Historically, the Southeast PMI subindexes are prone to volatile month-over-month fluctuations. Still, there are other factors to consider. For instance, the August national PMI index fell to its lowest reading in more than two years, and the August employment report indicated that the U.S. economy shed 17,000 manufacturing jobs. It's also possible, if not probable, that the strong U.S. dollar coupled with weak global demand is dragging down U.S. exports and reducing demand from domestic manufacturers.

No matter the cause, other aspects of the Southeast and national economy appear strong. We'll be monitoring the developments and hoping for some acceleration in the near future.

By Troy Balthrop, senior analyst with the Regional Economic Information Network at the Atlanta Fed's Nashville Branch

August 4, 2015

Auto Manufacturing an Economic Boon for Tennessee

Making cars has been giving an economic boost to the Volunteer State since the early 1980s, when Nissan built the state's first large-scale auto manufacturing plant in Smyrna. General Motors followed by establishing a plant in Spring Hill in 1990. The latest automaker to set up camp in Tennessee is Volkswagen, which opened its plant in Chattanooga in 2011. About a year ago, Volkswagen announced plans for an expansion at its Chattanooga facility. The Center for Business and Economic Research (CBER) at the University of Tennessee recently released a report detailing the economic impact of the Volkswagen expansion, which, needless to say, should be significant.

2012_volkswagen_chattanooga
Image copyright Volkswagen of America Inc.

The purpose of the Volkswagen plant expansion is to manufacture a new midsize SUV for the U.S. market. State and local governments offered incentives of nearly $300 million to entice Volkswagen to build its new SUV in Chattanooga and, according to the CBER report, the state should receive a high return on its investment. The expansion will add more than 500,000 square feet to the facility and an additional 1,800 employees. Tied to the expansion, Volkswagen plans to establish the North American Engineering and Planning Center in Chattanooga, which will create 200 jobs. The plant expansion and the R&D center together will create 2,000 new jobs, which will nearly double Volkswagen's current Chattanooga workforce of 2,358. These numbers are impressive, but they only scratch the surface of the estimated overall impact.

Chattanooga_map

The CBER report breaks down the overall impact of the plant expansion into two phases: the construction phase and the operations phase. The CBER projects the construction phase alone to be quite lucrative for residents of the state. It estimates that the construction and development stage will create 5,391 full-time jobs for a year. The report also anticipates the generation of $217 million in new income during that year for Tennesseans. State and local municipalities stand to gain a one-time increase in tax revenues equal to $20.5 million. During the operations phase (after the plant is fully operational), the plant is expected to create 9,799 new full-time permanent jobs in the state. These jobs would not only include new Volkswagen employees but also the jobs created at the numerous Volkswagen suppliers located in Tennessee.

New income for Tennesseans will be in the neighborhood of $372.6 million, according to CBER estimates. The income generated during the construction phase may be direct or indirect income. (An example of indirect income would be the hiring of construction workers who are employed by Tennessee construction firms, which then spend their earnings on goods such as food or clothing in the state.) The report estimates that every dollar spent on construction of the plant will result in 47 cents of income for Tennessee. (An example of direct income would be the salaries Volkswagen pays its new employees, and estimates indicate that Volkswagen will pay $100.9 million in salaries to its new employees.) In addition, Volkswagen plans to purchase many inputs directly from Tennessee suppliers, so every dollar spent during the operations phase is estimated to lead to $3.69 of income for Tennesseans.

There are also intangible benefits to consider, such as an increase in charitable giving as incomes rise. The multiplying effects of the plant expansion will touch many aspects of not only Tennessee's economy but also the entire regional economy. It will be interesting to watch as auto manufacturing continues to put down roots in the Southeast. Hopefully, the economic benefits are just beginning to rev their engines.

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

July 16, 2015

Southeast Manufacturing Rebounded in June

The Southeast Purchasing Managers Index (PMI) report, released on July 5, showed that manufacturing activity in the Southeast rebounded from a less-than-spectacular May. If you'll recall, May's PMI reading was heading in the wrong direction. The overall index had fallen to its lowest level this year, and new orders and production also appeared to be falling, but June's Southeast PMI got us back on the right track.

The Atlanta Fed's research department uses the Southeast PMI to track regional manufacturing activity. The Econometric Center at Kennesaw State University produces the survey, which analyzes 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. An index reading above 50 indicates expanding activity, and a reading below 50 indicates contracting activity.

The PMI index rose 2.7 points in June to 55.1 from May's 52.4 (see the chart). Most of the subindexes indicated positive movement as well, particularly new orders and production.

  • The new orders subindex rose 9.3 points to 55.3, after falling into contractionary territory in May.
  • The production subindex increased 8.9 points compared to the previous month and now reads 57.9.
  • The employment subindex declined 3.0 to 57.0.
  • The supplier deliveries subindex decreased 3.4 points to 52.6.
  • The finished inventory subindex increased 1.6 points to 52.6.
  • The commodity prices subindex fell 1.4 points and now reads 52.6.

Se-purchasing-managers

The rise in the overall index is welcome news, but even more welcome are increases in the new orders and production subindexes. The new orders subindex is the most forward-looking indicator in the survey. When new orders fall, it generally suggests that future demand for manufacturing products may be weakening and future production may be lower. As a result, employment levels at manufacturers could also decline. It would normally take several months of subpar activity for this to occur, and a one-month drop is nothing to get excited about. Still, it is always nice to rebound quickly. June's report will hopefully set the stage for a strong third quarter.

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

June 17, 2015

Southeast Manufacturing Dips in May

National manufacturing activity hasn't been particularly strong so far this year. It hasn't been particularly horrible mind you, but there hasn't been much to get excited about, either. Southeastern manufacturing activity—until recently—has been a different story. The Southeast purchasing managers index (PMI) and the Institute for Supply Management's national index both indicated that southeastern activity had been outpacing national activity in each of the first four months of 2015. I hate to throw cold water on the strong numbers, but according to the latest PMI report, released on June 5, that trend may be reversing.

The Atlanta Fed’s research department uses the PMI to track manufacturing activity in the Southeast. The survey, produced by the Econometric Center at Kennesaw State University, analyzes 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 indicates that manufacturing activity is expanding, and a reading below 50 indicates contracting activity.

The Southeast PMI has averaged a 57.9 reading so far in 2015, compared with a 52.4 for the national index. However, the May Southeastern PMI's overall index fell 5.2 points from April to 52.4, clocking in below the national index for the first time in four months (see the chart).

Se-purchasing-managers

The index remained above the 50 threshold for expansion, but the subindexes of the May report contained some disconcerting numbers:

  • The new orders subindex fell 11.0 points to 46.0.
  • The production subindex decreased 16.0 points compared with the previous month and now reads 49.0.
  • The employment subindex declined 1.0 to 60.0.
  • The supplier deliveries subindex increased 3.0 points to 56.0.
  • The finished inventory subindex decreased 1.0 points to 51.0.
  • The commodity prices subindex rose 9.0 points and now reads 54.0.

The 11-point fall in the new orders subindex was discouraging since it is the most forward-looking indicator of future activity. The new orders subindex has seen large one-month fluctuations in the past. For instance, it fell 27 points last December only to rebound 23.4 points the following month. So it could be a one-month aberration. Let's hope so. The 16-point fall in the production subindex was also an abnormally large fall, but—like new orders—it has happened before. Optimism for future production also decreased from April to May. When asked for their production expectations during the next three to six months, only 38 percent of survey participants expected production to be higher going forward, compared with 46 percent in April. The good news is that the employment subindex registered a strong reading, which is a good indication that manufacturers are still adding to their payrolls. So even though production outlooks have come down, firms still seem to expect that they will need employees to work more hours in the future, which could be a good sign for employment.

We should remember that the overall index still indicated expansion in manufacturing. Hopefully, as the summer heats up, so will manufacturing activity. I hate to throw cold water on our hot streak, but this time of year, a little cold water can feel good.

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

September 17, 2015

Southeast Manufacturing Slows in August

Em_sp_manufacturing

Southeast manufacturing activity had been fairly sturdy this year, according to the Southeast Purchasing Managers Index (PMI). The PMI averaged a healthy 56.2 reading from January through July and, with the exception of one subpar month, new orders and production levels had been robust. However, the latest report indicated that factories pumped the brakes in August. According to the August report, new orders and production both slowed significantly.

The Atlanta Fed's research department uses the Southeast PMI to track manufacturing activity in the region. The Econometric Center at Kennesaw State University produces the survey, which examines 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. An index reading above 50 indicates that activity is expanding, and a reading below 50 indicates that activity is contracting.

The overall PMI declined 5.5 points from July and now stands at 48.8 (see the chart). The August report marks the first month the overall index has been below the 50-point threshold since November 2014. The most disconcerting aspects of the report centered on the month-over-month declines in the new orders, production, and employment subindexes.

  • The new orders subindex fell 7.1 points from July to a reading of 49.1.
  • The production subindex dropped 15.2 points from the previous month to a reading of 49.1.
  • The employment subindex declined 6.3 points to a reading of 50.0, which indicates no change in employment levels at Southeast factories.
  • The supplier deliveries subindex increased 3.6 points to 50.9.
  • The finished inventory subindex decreased 2.7 points to 44.6.
  • The commodity prices subindex fell 10.7 points and now reads 34.8.

Southeast-purchasing-managers

On its own, the fall in the Southeast PMI is nothing to get too worked up about. Historically, the Southeast PMI subindexes are prone to volatile month-over-month fluctuations. Still, there are other factors to consider. For instance, the August national PMI index fell to its lowest reading in more than two years, and the August employment report indicated that the U.S. economy shed 17,000 manufacturing jobs. It's also possible, if not probable, that the strong U.S. dollar coupled with weak global demand is dragging down U.S. exports and reducing demand from domestic manufacturers.

No matter the cause, other aspects of the Southeast and national economy appear strong. We'll be monitoring the developments and hoping for some acceleration in the near future.

By Troy Balthrop, senior analyst with the Regional Economic Information Network at the Atlanta Fed's Nashville Branch

August 4, 2015

Auto Manufacturing an Economic Boon for Tennessee

Making cars has been giving an economic boost to the Volunteer State since the early 1980s, when Nissan built the state's first large-scale auto manufacturing plant in Smyrna. General Motors followed by establishing a plant in Spring Hill in 1990. The latest automaker to set up camp in Tennessee is Volkswagen, which opened its plant in Chattanooga in 2011. About a year ago, Volkswagen announced plans for an expansion at its Chattanooga facility. The Center for Business and Economic Research (CBER) at the University of Tennessee recently released a report detailing the economic impact of the Volkswagen expansion, which, needless to say, should be significant.

2012_volkswagen_chattanooga
Image copyright Volkswagen of America Inc.

The purpose of the Volkswagen plant expansion is to manufacture a new midsize SUV for the U.S. market. State and local governments offered incentives of nearly $300 million to entice Volkswagen to build its new SUV in Chattanooga and, according to the CBER report, the state should receive a high return on its investment. The expansion will add more than 500,000 square feet to the facility and an additional 1,800 employees. Tied to the expansion, Volkswagen plans to establish the North American Engineering and Planning Center in Chattanooga, which will create 200 jobs. The plant expansion and the R&D center together will create 2,000 new jobs, which will nearly double Volkswagen's current Chattanooga workforce of 2,358. These numbers are impressive, but they only scratch the surface of the estimated overall impact.

Chattanooga_map

The CBER report breaks down the overall impact of the plant expansion into two phases: the construction phase and the operations phase. The CBER projects the construction phase alone to be quite lucrative for residents of the state. It estimates that the construction and development stage will create 5,391 full-time jobs for a year. The report also anticipates the generation of $217 million in new income during that year for Tennesseans. State and local municipalities stand to gain a one-time increase in tax revenues equal to $20.5 million. During the operations phase (after the plant is fully operational), the plant is expected to create 9,799 new full-time permanent jobs in the state. These jobs would not only include new Volkswagen employees but also the jobs created at the numerous Volkswagen suppliers located in Tennessee.

New income for Tennesseans will be in the neighborhood of $372.6 million, according to CBER estimates. The income generated during the construction phase may be direct or indirect income. (An example of indirect income would be the hiring of construction workers who are employed by Tennessee construction firms, which then spend their earnings on goods such as food or clothing in the state.) The report estimates that every dollar spent on construction of the plant will result in 47 cents of income for Tennessee. (An example of direct income would be the salaries Volkswagen pays its new employees, and estimates indicate that Volkswagen will pay $100.9 million in salaries to its new employees.) In addition, Volkswagen plans to purchase many inputs directly from Tennessee suppliers, so every dollar spent during the operations phase is estimated to lead to $3.69 of income for Tennesseans.

There are also intangible benefits to consider, such as an increase in charitable giving as incomes rise. The multiplying effects of the plant expansion will touch many aspects of not only Tennessee's economy but also the entire regional economy. It will be interesting to watch as auto manufacturing continues to put down roots in the Southeast. Hopefully, the economic benefits are just beginning to rev their engines.

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

July 16, 2015

Southeast Manufacturing Rebounded in June

The Southeast Purchasing Managers Index (PMI) report, released on July 5, showed that manufacturing activity in the Southeast rebounded from a less-than-spectacular May. If you'll recall, May's PMI reading was heading in the wrong direction. The overall index had fallen to its lowest level this year, and new orders and production also appeared to be falling, but June's Southeast PMI got us back on the right track.

The Atlanta Fed's research department uses the Southeast PMI to track regional manufacturing activity. The Econometric Center at Kennesaw State University produces the survey, which analyzes 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. An index reading above 50 indicates expanding activity, and a reading below 50 indicates contracting activity.

The PMI index rose 2.7 points in June to 55.1 from May's 52.4 (see the chart). Most of the subindexes indicated positive movement as well, particularly new orders and production.

  • The new orders subindex rose 9.3 points to 55.3, after falling into contractionary territory in May.
  • The production subindex increased 8.9 points compared to the previous month and now reads 57.9.
  • The employment subindex declined 3.0 to 57.0.
  • The supplier deliveries subindex decreased 3.4 points to 52.6.
  • The finished inventory subindex increased 1.6 points to 52.6.
  • The commodity prices subindex fell 1.4 points and now reads 52.6.

Se-purchasing-managers

The rise in the overall index is welcome news, but even more welcome are increases in the new orders and production subindexes. The new orders subindex is the most forward-looking indicator in the survey. When new orders fall, it generally suggests that future demand for manufacturing products may be weakening and future production may be lower. As a result, employment levels at manufacturers could also decline. It would normally take several months of subpar activity for this to occur, and a one-month drop is nothing to get excited about. Still, it is always nice to rebound quickly. June's report will hopefully set the stage for a strong third quarter.

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

June 17, 2015

Southeast Manufacturing Dips in May

National manufacturing activity hasn't been particularly strong so far this year. It hasn't been particularly horrible mind you, but there hasn't been much to get excited about, either. Southeastern manufacturing activity—until recently—has been a different story. The Southeast purchasing managers index (PMI) and the Institute for Supply Management's national index both indicated that southeastern activity had been outpacing national activity in each of the first four months of 2015. I hate to throw cold water on the strong numbers, but according to the latest PMI report, released on June 5, that trend may be reversing.

The Atlanta Fed’s research department uses the PMI to track manufacturing activity in the Southeast. The survey, produced by the Econometric Center at Kennesaw State University, analyzes 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 indicates that manufacturing activity is expanding, and a reading below 50 indicates contracting activity.

The Southeast PMI has averaged a 57.9 reading so far in 2015, compared with a 52.4 for the national index. However, the May Southeastern PMI's overall index fell 5.2 points from April to 52.4, clocking in below the national index for the first time in four months (see the chart).

Se-purchasing-managers

The index remained above the 50 threshold for expansion, but the subindexes of the May report contained some disconcerting numbers:

  • The new orders subindex fell 11.0 points to 46.0.
  • The production subindex decreased 16.0 points compared with the previous month and now reads 49.0.
  • The employment subindex declined 1.0 to 60.0.
  • The supplier deliveries subindex increased 3.0 points to 56.0.
  • The finished inventory subindex decreased 1.0 points to 51.0.
  • The commodity prices subindex rose 9.0 points and now reads 54.0.

The 11-point fall in the new orders subindex was discouraging since it is the most forward-looking indicator of future activity. The new orders subindex has seen large one-month fluctuations in the past. For instance, it fell 27 points last December only to rebound 23.4 points the following month. So it could be a one-month aberration. Let's hope so. The 16-point fall in the production subindex was also an abnormally large fall, but—like new orders—it has happened before. Optimism for future production also decreased from April to May. When asked for their production expectations during the next three to six months, only 38 percent of survey participants expected production to be higher going forward, compared with 46 percent in April. The good news is that the employment subindex registered a strong reading, which is a good indication that manufacturers are still adding to their payrolls. So even though production outlooks have come down, firms still seem to expect that they will need employees to work more hours in the future, which could be a good sign for employment.

We should remember that the overall index still indicated expansion in manufacturing. Hopefully, as the summer heats up, so will manufacturing activity. I hate to throw cold water on our hot streak, but this time of year, a little cold water can feel good.

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