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Purchasing Managers Report Uptick In Detroit-Area Economy

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DETROIT — The Southeast Michigan Purchasing Managers Index, a composite index of local economic activity, stood at 53.8 for the month of August. An index above 50 indicates an expanding economy. The Southeast Michigan economy expanded at a faster rate in August than in July, when the index was 51.7.

The August survey of metro Detroit’s purchasing managers indicates that the local economy has expanded for 19 straight months, despite uncertainty in the national and global markets.

According to supply chain faculty at Wayne State University’s School of Business Administration, who calculate the PMI each month in partnership with the local chapter of the Institute for Supply Management, the index is down considerably from the second quarter of the year when index values exceeded 60.

“While we saw a slight increase in economic activity this month over last, we are beginning to see a trend toward slower growth compared to earlier this year,” said Timothy Butler, associate professor of global supply chain management at Wayne State’s business school.

The notable changes in the August index were related to employment, finished goods inventories and commodity prices.

Employment bounced back to 56.9 in August from a dismal 39.5 in July, though according to Butler, the July employment index may have been impacted by scheduled shut-downs in the automotive sector.

Finished goods inventories also increased significantly, from 29.2 to 51.7. Butler said this could be due to variation in consumer demand.

Commodity prices continue to rise, but the August commodity index value of 62.1 is substantially less than the July value of 84.3. The three month average of 71.8 indicates inflation is still occurring in the commercial markets.

Metals, food products and packaging materials were a few of the items that purchasing managers noted were increasing in price. Fuel prices were reported as decreasing when the survey was administered before Hurricane Irene affected the supply chain.

The percentage of purchasing managers who expect the business environment to become less stable over the next six months has increased to more than 24 percent. More than 58 percent expect the environment will not change significantly in that time frame.

The complete Southeast Michigan Purchasing Managers Index report for August is available online at http://www.ism-sem.org/uploaded_pics/pdf-20110830181747.pdf.

The Institute for Supply Management – Southeast Michigan serves its members as an affiliate of the Institute for Supply Management by providing superior opportunities for education, networking, and career enhancement as a means of advancing and promoting the leading edge practices and profession of purchasing and supply management.

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