Industrial Activity - August 2009
Kennesaw State University's Southeast Purchasing Managers Index (PMI), a gauge of regional manufacturing, increased from 47.2 in June to 50.0 in July. July's increase was mostly attributed to gains in new orders and production, up 4.5 and 13.4 points, respectively. (A PMI over 50 indicates expanding manufacturing activity, a PMI below 50 indicates contracting activity, and a reading of exactly 50 indicates no expansion or contraction.)
Trucking and Railway
The American Trucking Associations' (ATA) index fell 14 percent in June 2009 from a year earlier, and industry economists noted that tonnage levels are not likely to grow significantly until mid-2010. Cass Information Systems, a major U.S. processor of payment transactions for broad freight industry companies, reported that its July 2009 shipment index fell only 15 percent from July 2008, following a 20 percent drop in June 2009.
The Association of American Railroads reported that through early August, rail traffic was down 18 percent from a year earlier, with all industry volumes posting double-digit declines.
According to U.S. Department of Commerce data, the value of international shipments passing through District ports continued to soften through June 2009. Exports were down slightly while imports declined 12.3 percent. The value of regional imports deteriorated the most in Tampa, Savannah, and New Orleans, led by lower shipments of autos and consumer goods. Most District ports registered smaller declines in June than in previous months.
Although stocks have risen modestly since mid-July, the Energy Information Administration (EIA) reported a 16.2 million barrel (8 percent) decline in Gulf Coast crude inventories since the seasonal peak in mid-April. Despite the decline, stocks remain above their average range for this time of year. Gulf Coast gasoline inventories are down 4 percent over the four weeks ending August 10, though they remain well above their seasonal average.
Production and Refining
According to the EIA's short-term outlook, national crude oil production is expected to increase 5 percent in 2009, with two major production platforms in the Gulf of Mexico coming online. The region's year-to-date crude oil production has averaged 33,000 barrels, or 2 percent above the same period in 2008.
According to the Baker Hughes Rig Count, on average, 38 rigs operated off the Gulf Coast during July, 28 rigs less than a year earlier. Gulf Coast refineries operated at 85 percent of their operable capacity in May, down 5 percent from year-earlier levels.
District-assembled vehicle production through mid-July continued to weaken, down 49 percent from comparable 2008 levels, with all companies posting double-digit declines. However, the Car Allowance Rebate System (CARS) program has boosted traffic and sales across the country with most automakers anticipating a surge in production for the remainder of 2009.
The recent sales rebound has brightened regional automakers' near-term outlooks. Hyundai and Mercedes have reportedly returned to longer workweek schedules. Meanwhile, Honda recently announced the addition of overtime hours in September and October to catch up with dwindling inventories and strong sales.
Longer term, the outlook for regional vehicle production is bright. As of June , Kia Motors has hired almost 700 workers at its manufacturing facility in West Point, Ga., and by the end of 2010 the job count could reach 2,500 workers with an annual production capacity of 300,000 vehicles. By early 2010, Volkswagen will start production of an undetermined midsize sedan, employing about 2,000 workers with an initial annual capacity of 150,000 vehicles.