Industrial Activity - July 2009
According to our informal survey, District manufacturing contacts noted less of a decline in current conditions and expectations in June than in May. Production levels and shipments, as well as incoming new orders, decreased slightly from May levels. The proportion of contacts reporting employment cutbacks increased marginally; however, the average workweek increased. Prices and inventories for raw materials rose in June, and while prices for finished goods increased, inventories decreased. Export orders continued to decline, though at a less substantial rate.
Kennesaw State University's Southeast Purchasing Managers Index (PMI), a gauge of regional manufacturing, decreased from 50.2 in May to 47.2 in June. May's reading was the first over 50 since July 2008, but June's reading—perhaps a correction to overly optimistic responses in May—was nearly 5 points below the June 2008 reading. (A PMI over 50 indicates expanding manufacturing activity, below 50, contracting activity.)
Trucking and Railway
According to Global Insight, import cargo volume at the nation's major retail container ports remained nearly 20 percent below year-earlier levels. The American Trucking Associations' (ATA) National Truck Tonnage index for May dropped 11 percent from a year earlier.
The Association of American Railroads reported that in June, rail traffic remained down from a year earlier with all industry volumes posting double-digit declines.
The value of international shipments passing through District ports continued to soften in June. The value of regional imports deteriorated the most in Tampa, Savannah, and Miami, led by lower shipments of autos and consumer goods. Regional exports also slowed from earlier months, with most ports posting lower export values of industrial machinery, autos, and farm-related products.
The Energy Information Administration (EIA) reported a 19.4 million barrel (10 percent) decline in Gulf Coast crude inventories since mid-April (seasonal peak). Despite the recent dip, stocks remain above their average range for this time of year. Gulf Coast gasoline inventories, after dipping somewhat in early June, have risen 5 percent over the four weeks ending July 10, bringing them 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 25,000 barrels, or 2 percent above the same period in 2008.
According to the Baker Hughes Rig Count, on average, 48 rigs operated off the Gulf Coast during June, 19 rigs fewer than a year earlier. Gulf Coast refineries operated at 86 percent of their operable capacity in March, down 1 percent from year-earlier levels.
Lower demand for District-assembled vehicles continued in June, down 50.2 percent from comparable 2008 levels, with all companies posting double-digit declines. Most companies have recently cut temporary jobs, offered buyouts to permanent workers, and shortened workweek schedules to adjust vehicle inventories to the decrease in demand. The decrease in spending on discretionary durable purchases has dampened the outlook for regional vehicle producers and their suppliers. However, news about production stabilization and the addition of new vehicles to the production line has brightened producers' near-term outlooks. For example, Hyundai and Mercedes have recently returned to longer workweek schedules, and Honda has moved production of the V-6 Accord from its Ohio plant to its Alabama plant, adding the Accord to the three models already in production there: the Pilot, Odyssey, and Ridgeline.