Industrial Activity - April 2008Data and Analysis
Most industrial contacts reported that production and volume of shipments were down in March from 2007 levels. About half of the contacts noted that in March their companies had either job cutbacks or fewer hours worked. Firms producing goods for the construction industry continued to report very weak activity. On the bright side, several companies providing specialized products for the auto industry and those that export reported stable or improved conditions in early 2008. Kennesaw State University's Southeast Purchasing Manager's Index (PMI) for March was 54.3, up significantly from February's reading of 47.1. (A PMI index over 50 indicates that manufacturing is expanding while a reading below 50 means that the industry is contracting.)
Trucking and Railway
February's national truck tonnage index from the American Trucking Association was unchanged from its January reading and up 3.5 percent compared with February 2007. Higher diesel prices and weak freight demand were dominant factors for the disappointing first quarter financial performance of several regional trucking companies. Regional rail industry data for March and April show widespread weaknesses, with shipments of housing-related products and autos and intermodal shipments posting the largest declines. On the brighter side, regional rail shipments of chemicals, farm goods, and some metals posted improved readings in recent weeks.
For the 12-month period ending in February, the value of imports flowing through district ports rose sharply, mostly driven by gains in petroleum. District imports climbed 9 percent, a bit higher than national import values. District exports also set a record, reflecting strong gains in farm goods, machinery, and autos. Exports jumped 22 percent for the 12 months ending in February, growing about 8 percentage points more than overall U.S exports.
The Energy Information Administration reported a 2.4 million barrel drop in Gulf Coast crude oil inventories the first week of April. Oil inventories are in the middle of their five-year average range. Motor gasoline inventories in all regions except the Gulf Coast have declined since March. Gulf Coast gasoline inventories remain ample partly because of the region's large refining capacity. These inventories in the first three weeks of April averaged roughly 12 percent more than during the same period last year.
Production and Refining
Increased crude oil production in the District in April made up for declines in February and March. District production for the year through the third week of April averaged 53,000 barrels, or 4 percent, above the same period last year. The Minerals Management Service, a bureau of the U.S. Department of the Interior in charge of offshore federal drilling rights, held two successful federal lease sales in the Gulf of Mexico on March 19, increasing the region's production potential. According to the Baker Hughes Rig Count, roughly 60 rigs operated in the U.S. Gulf Coast during the first three weeks of April. Gulf Coast refineries operated at 83 percent of their operable capacity in January, a 5 percentage point drop from a month earlier and the lowest since January 2006.
Vehicle production in District states remained weak in early 2008. Only two of the five companies with plants in District states reported higher production at these plants for the beginning of 2008 through late April when compared to the same period a year earlier. Overall production in the District since the beginning of 2008 declined 13 percent from 2007 levels compared with a 10 percent drop in the nation. Vehicle production for the rest of 2008 will be affected by the final closing of GM's Doraville, Georgia, facilities and the restarting of production at GM's Spring Hill, Tennessee, plant this summer.
Overall, Alabama's vehicle production is expanding. The three companies with plants in the state—Honda, Hyundai, and Mercedes—assembled more vehicles last year than in 2006. Honda and Mercedes production in 2007 and early 2008 have been in line with capacity. However, Hyundai's Montgomery plant was recently running at only 80 percent of its 300,000 vehicle capacity.
Production at GM's Doraville plant declined during the first part of the year as the plant reached the end of the 2008 model production cycle. GM will permanently close several assembly plants in 2008, including the Doraville plant in September. Ford closed its Hapeville plant last year.
Production at GM's Shreveport plant is off sharply from 2007 as sales of the Chevrolet Colorado, GMC Canyon, and HUMMER H3 weakened in late 2007 and early 2008. GM recently cut production rates at the plant and announced layoffs affecting second-shift plant workers.
Lower production at Nissan's Smyrna plant and the temporary closing of Saturn's Spring Hill plant affected Tennessee's auto production levels. In late February, Nissan offered buyouts to assembly line and maintenance workers at its assembly plants in Smyrna and Decherd. GM's vehicle production in Spring Hill will start up again this summer after a lengthy retooling. The plant is expected to produce about 100,000 Chevy Traverse per year.
Two foreign auto companies (Kia Motors and Toyota) have announced new vehicle assembly production for 2009 and 2010 in West Point, Georgia, and Blue Springs, Mississippi, respectively. Volkswagen has also announced that it is considering several southern states as possible sites for a new assembly plant.