Southeast Michigan Purchasing Managers Index shows economic stability in the region despite drop in new orders and increased commodity prices

The Southeast Michigan economy continued modest growth during February, according to the Southeast Michigan Purchasing Managers Index (PMI). The February index value is 51.7— a small decline 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.

“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 (PMI) 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 here.

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