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Detroit Area Economy Cools A Bit

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DETROIT (WWJ) – The Southeast Michigan Purchasing Managers Index for December is 50.6, down from 58.3 in November, indicating a slowdown in economic expansion.

The decline brought the three-month average down to 57.3.

The Southeast Michigan PMI is a diffusion index with a midpoint of 50. A group of corporate purchasing managers is asked monthly if a variety of economic indicators, such as hiring, new orders and production, are the same, higher or lower than a month ago. Those answering higher push the index above 50, those answering lower push it below 50. Thus, PMI values above 50 suggest economic growth, and the higher above 50, the faster the growth, while values below 50 suggest recession.

“The PMI dropped in December primarily due to a decrease in new orders and production at year’s end,” said Timothy Butler, associate professor of supply chain management at Wayne State University’s School of Business Administration. “It is important to realize that even though the PMI index declined, it still remains near 50, indicating that the economy maintained relative stability compared to the prior month.”

Butler said that among components of the index, the finished goods inventory figure rose sharply in December to 63 from 52.1 in November, while the employment index rose slightly to 56.8 from 54.3 in November.

Butler also pointed out that an encouraging 68 percent of respondents expect the economy to remain the same or improve over the next six months, while just under 22 percent believe the economy will become less stable. Respondents noted that they are waiting to see if new product launches are successful and new orders pick-up.

The full Southeast Michigan PMI report for December can be found at http://www.ism-sem.org/resources/files/2013-December-PMI-Report.pdf.

The Southeast Michigan PMI is a research partnership between Wayne State’s School of Business Administration and the Institute for Supply Management – Southeast Michigan.

Moer at http://www.ism-sem.org or http://www.business.wayne.edu.

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