Industrial Activity - February 2010


Kennesaw State University's Southeast Purchasing Managers Index (PMI), a gauge of regional manufacturing, increased from 45.2 in December to 45.8 in January. (A reading above 50 indicates expanding manufacturing activity; below 50, contracting activity; and exactly 50, no expansion or contraction.) The increase was mostly attributed to modest gains in the new orders and production components, up 8.5 and 2.3 index points, respectively. The overall index was dampened by a 2.3 point loss in the employment component and a 8.4 point loss in the finished inventory component.

Transportation and Trade

Trucking and Railway
Freight indicators continued to improve in December and January. According to the American Trucking Associations (ATA), truck tonnage levels jumped 6.6 percent in December, the first gain since September 2008. Meanwhile, Cass Information Systems, a major U.S. processor of payment transactions for freight companies, also reported improvements of 1.9 and 5.6 percent from December 2008 and January 2009, respectively.

Despite these improved readings, industry economists cautioned that much of the recent pickup in freight has been driven by inventory effects and that business activity should moderate in 2010, keeping a lid on tonnage growth.

The Association of American Railroads reported that rail shipments through mid-February were up sharply for automotive, chemical, and farm goods. Coal shipments continued to be weak, partially offsetting gains reported in other sectors.

International Trade
According to U.S. Department of Commerce data, the value of international shipments passing though District ports in December continued to decline but at a slower pace than earlier in the year. Regional imports fell 31 percent on a year-over-year basis while exports dropped 16.5 percent. All regional ports experienced declines in imports while Tampa, New Orleans, and Mobile saw the biggest decline in exports.

Energy Production

The U.S. Energy Information Administration (EIA) reported that Gulf Coast crude inventories have continued to increase since mid-January, rising by 11 million barrels over the four weeks ending February 12. Crude stocks are near the top of their average range for this time of year, roughly tracking a typical seasonal pattern in which inventories begin to rebuild toward the beginning of the calendar year. Gulf Coast gasoline inventories are up 5.6 percent since the beginning of the year and remain above their seasonal average.

Production and Refining
According to the EIA's short-term outlook, national crude oil production averaged 5.32 million barrels per day in 2009 and is expected to increase to 5.51 million barrels per day in 2010. District states produced an average of 1.5 million barrels of crude oil per day since the beginning of the year, up 22 percent from the same period last year, when crude prices were at record lows.

Gulf Coast refineries operated at 83.7 percent of their operable capacity in November, up 0.8 percentage points from October and down 0.8 percentage points from year-earlier levels.

Automobile Production

Through mid-February, District vehicle production was up sharply from low levels from a year earlier, but production was still below levels seen in 2008.

Despite a pickup in sales of some vehicle segments, some contacts have noted that automakers are reluctant to hike production even in the face of low stocks and improving market conditions. According to Automotive News, inventory levels at the end of January were 25 percent below historical levels for this time of year.

Toyota's recent recalls have affected the company's engine production in Huntsville, Ala., forcing cutbacks in hours for about 300 workers. The Huntsville plant supplies V-8 engines for Toyota's plant in San Antonio, Tex. The Texas plant expects to halt production in February and March to adjust for a buildup of unsold vehicles at dealerships.