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SE Michigan Economic Index Remains High

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The Southeast Michigan Purchasing Managers Index dipped slightly from 71.8 to 67.9 in April — but the economists at Wayne State University who track the index point out that 67.9 still represents strong economic growth.

Index values above 50 generally represent an expanding economy, while values below 50 suggest a weakening economy.

With the April survey results, the SEM-PMI has exceeded 50 for 15 consecutive months. The three-month average is up more than four points to 67.7. That is a strong positive indicator for the Southeast Michigan economy, according to faculty at Wayne State University’s School of Business Administration and members of the Southeast Michigan chapter of the Institute for Supply Management who partner to conduct the survey each month.

Purchasing managers indicated that employment at their firms is growing, but not as fast as in March. The Employment Index value was 66.7, down slightly from 70 in March, but still signals strength since the value exceeds 50.

Specific values that comprise the index maintained their steady growth. The Production Index is down slightly to 78.3 from 80 in March, but is still quite strong. Like the overall index, the Production Index has also exceeded 50 for 15 consecutive months. Similarly, the New Orders Index is down in April to 68.3 from 78.3, but it is still well above the benchmark value of 50.

Raw materials inventory improved to 55 from the March index value of 53.3, and finished goods inventory increased sharply in April to 60 from the March Index value of 48.3.

Commodity prices continue to rise, and the April Index value increased to 86.3 from the March Index value of 78.3.

“Over 70 percent of the survey respondents indicated that commodity prices were higher in April than in March, and none indicated that prices were lower,” said Timothy Butler, associate professor of global supply chain management at Wayne State’s business school, who analyzed the survey results. “Specific items that purchasing managers noted as increasing in price were petroleum products and fuel, cotton products, metals such as steel and copper, and freight costs.”

Purchasing managers indicated that employment at their firms is growing, but not as fast as in March. The Employment Index value was 66.7, down slightly from 70 in March, but still signals strength since the value exceeds 50.

Butler said that overall, purchasing managers are optimistic about the near future. Over 26 percent of respondents expect that the economy will become more stable, while 60 percent anticipate that it will remain about the same.

Concerns about the future hinge upon gas prices, Mideast unrest, and the Japan earthquake disaster and its impact upon the supply chain.

The complete Southeast Michigan Purchasing Managers Index report for April is available online at http://www.ism-sem.org/uploaded_pics/pdf-20110429152424.pdf.

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