Tuesday, October 19, 2010

Manufacturing Employment Expands at "The Fastest Rate This Year" in Southeast Michigan

Given all the doom and gloom media coverage concerning the economy in Michigan (or maybe it's the doom and gloom Republicans saturating the airwaves with their patented brand of buzzkill, one or the other), this report took me by surprise - so much so that I decided it deserved a post.

The Southeast Michigan Purchasing Managers Index is a leading economic indicator of manufacturing activity, measuring areas like production levels, new orders, inventories, deliveries - and the big one, employment. Modeled after the federal Purchasing Managers Index, it contains not only readings on the hard data, but on the confidence level of managers and buyers as well. Investors look to this index as it tends to set the tone for other economic reports as related to the GDP - in a nutshell, it indicates whether the economy as a whole is expanding or contracting.

So, maybe you thought we were slowing down again? Think again. Watch what happened in September...

The Southeast Michigan Purchasing Managers Index (PMI) expanded to 65.0 in September, rebounding from a score of 54.2 in August. This is the fastest expansion rate in the local economy since June, according to the monthly survey of purchasing managers. The three-month average is 58.6.

The Southeast Michigan PMI is a composite index of local economic activity calculated from survey data compiled by Wayne State University School of Business Administration faculty and the local chapter of the Institute for Supply Management. Like the national version of the index, a score above 50 indicates economic expansion. The higher the score is above 50, the faster the growth rate.

The local PMI showed faster growth in production, new orders and employment in September. Employment expanded at the fastest rate this year, coming in at 66.7.

"The Southeast Michigan PMI shows local economic expansion for eight consecutive months, and the economy is still growing," said Nitin Paranjpe, an economist and supply chain faculty member at Wayne State's business school who analyzed the survey data.

"Chicago's PMI also rebounded sharply in September, easing fears of a double-dip recession, at least in the Midwest."

Nationally, the PMI for the manufacturing sector expanded for the 14th straight month in September, but at a slower pace than in August.

About 86 percent of the local purchasing managers surveyed said they expect the local economy to improve or remain about the same over the next six months. Comments from survey participants suggested the sustained economic growth caught them by surprise.

Respondents also pointed to "sudden increases in demand" leading to concerns about capacity and lead time for orders. They also are worried about health care, high unemployment, and federal tax extensions as well - but they see sustained growth as of now.

Moral of the story? Don't believe the Republicans when it comes to descriptions of the economy. They want you to think that everything is bad, bad, bad - when in reality all the indicators are definitely pointing up, and they have been for most of this year.