Southeast Michigan Purchasing Managers Index Falls Slightly; GR Index Up

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DETROIT — The Southeast Michigan economy continued modest growth during February, according to the Southeast Michigan Purchasing Managers Index.

Meanwhile, a similar survey in West Michigan saw a nice increase.

In southeast Michigan, the February index value is 51.7, down from the January index of 55.3.

Southeast Michigan PMI values have ranged between 50 and 55 for seven consecutive months. A PMI value above 50 generally suggests an expanding economy, and the farther above 50, the faster the growth.

“The Southeast Michigan PMI has maintained a value over 50 for 35 of the past 36 months, indicating a steady strengthening of the regional economy,” said Timothy Butler, associate professor of supply chain management at Wayne State’s business school.

Butler said the Production Index of 51.4, the Employment Index of 54.2 and the Vendor Deliveries Index of 55.6 contributed to the favorable reading this month. He added that the New Orders Index dropped to 46.6, which indicates that there was a reduction in new orders in the region in February.

“The change in the New Orders Index is somewhat troubling, because if new orders contract over the long haul, other elements and the index itself will likely show contraction,” said Ken Doherty, a member of the Institute for Supply Management and assistant vice president for procurement and strategic sourcing at Wayne State University. “It’s not a cause for alarm, just something to keep our eye on.”

The Commodity Prices Index increased sharply to 66.7 from the January index of 58.9. This is the highest Commodity Price Index since October 2011, according to the Southeast Michigan PMI survey report. Items increasing in price included plywood, plastics, copper, aluminum, stainless steel and electrical components. The only commodity reported down in price was steel.

Of the purchasing managers surveyed, 63.9 percent indicated that the economy will remain about the same over the next six months, 13.9 percent indicated the economy will be more stable and 22.2 percent responded that the economy will be less stable.

“Respondents from the heavy truck industry expressed concerns of a downturn, and in the health sector there is concern over the implementation of health legislation,” Doherty said.

The Southeast Michigan Purchasing Managers Index is a research partnership between Wayne State University’s School of Business Administration and the Institute for Supply Management – Southeast Michigan. The complete report for February is available for download at http://www.ism-sem.org/uploaded_pics/pdf-20130228181452.pdf.

In West Michigan, meanwhile, the industrial economy is “nicely up,” according to the results of a monthly survey compiled by Brian G. Long, director of Supply Management Research in the Seidman College of Business at Grand Valley State University.

The survey results are based on data collected during the last two weeks of February.

Both December and January were flat, but in February, things started to pick up. The survey’s index of business improvement, called new orders, came in at +16, up from the dead flat zero in January. The production index shot up to +21 from January’s bearish -6. Activity in purchasing offices also turned back to positive at +12, up from -1. The employment index, which was already positive at +10, rose to +22.

“Looking at individual industrial groups, the auto parts suppliers remain positive, and some are busier due to production schedules being revised upward,” Long said. “Similar to last month, the capital equipment firms are still widely mixed, but some firms are reporting business to be picking up considerably. For industrial distributors, this month’s bias was to the up side, with no firms reporting downticks. Finally, the office furniture firms are still holding their own, but the market shows signs of topping out or stabilizing at the current level.”

The Institute for Supply Management survey is a monthly survey of business conditions that includes 45 purchasing managers in the greater Grand Rapids area and 25 in Kalamazoo. The respondents are from the region’s major industrial manufacturers, distributors and industrial service organizations. It is patterned after a nationwide survey conducted by the Institute for Supply Management. Each month, the respondents are asked to rate eight factors as “same,” “up” or “down.” An expanded version of this report and details of the methodology used to compile it are available at www.gvsu.edu/scblogistics.

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