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Detroit-Area Economic Index Hits 10-Month High

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DETROIT — The Southeast Michigan Purchasing Managers Index grew to 66.1 in March, the highest PMI reading since May 2011.

A three-month average of 65.7 indicates that the southeast Michigan economy is experiencing healthy growth.

An index above 50 indicates economic expansion, and the higher above 50, the faster the growth. As a leading indicator, the PMI often forecasts the overall economic condition in the region.

Each month, faculty from the School of Business Administration at Wayne State University and members of the Southeast Michigan chapter of the Institute for Supply Management survey metro Detroit’s purchasing managers, examining factors such as production, new orders, inventories of raw materials and finished goods, employment, vendor deliveries and commodity prices.

“Production, new order activity and employment all showed solid growth in March, pointing to a stronger economy,” said Nitin Paranjpe, an economist and supply chain faculty member at Wayne State’s business school who analyzed the survey data.

“In this time of high unemployment, the stronger economy is paradoxically leading to some labor shortages, especially in industrial, mechanical and electrical engineers,” he said. “This may lead to higher wage pressures building for engineers.”

With the growing economy comes higher prices. The commodity price index was unchanged from last month at 65.5, but the three-month average moved up, showing sustained price pressure.

“Commodity prices, especially oil-based, continue to grow,” said Kenneth Doherty, a member of the Institute for Supply Management and assistant vice president for procurement and strategic sourcing at Wayne State University. “This may act as an impediment to growth down the line, and also could lead to higher inflation.”

When asked about their expectations of the business environment over the next six months, the majority of survey respondents, 58.6 percent, expected conditions to remain the same. Equal numbers of purchasing managers expected more or less stable conditions, at 20.7 percent each.

Comments from respondents were largely positive, many indicating increasing sales and improved conditions over last year. Negative comments indicated concerns over taxes, health care, increasing oil prices, labor shortages and the European financial crisis.

The complete Southeast Michigan Purchasing Managers Index report for March is available online at www.ism-sem.org/uploaded_pics/pdf-20120402034320.pdf.

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