A survey of Jacksonville area manufacturers showed the local economy is contracting for the fifth straight month, with respondents not expecting conditions to change over the next 12 months.
A Purchasing Manager’s Index derived from the survey by the University of North Florida’s Local Economic Indicators Project stood at 48.1 in August.
A reading below 50 in UNF’s Jacksonville Economic Monitoring Survey indicates contraction while a reading above 50 signals expansion.
The manufacturers surveyed were less optimistic than they were the previous month, with the Business Activity Outlook Index dropping from 53 in July to 50 in August.
“For the Jacksonville economy, this lack of growth expectation could imply that businesses are adopting a wait-and-see approach, influenced by factors such as economic uncertainty, consumer demand, and ongoing challenges in the labor market and supply chains,” UNF economist Albert Loh said in his monthly report on the survey.
Loh said uncertainty over when the Federal Reserve Board might cut interest rates is affecting the outlook.
“Higher interest rates can increase borrowing costs for businesses, potentially slowing investments in expansion and capital improvements,” he said.
“On the other hand, some sectors, such as technology, are experiencing strong demand, but this positive factor may be outweighed by broader economic concerns, contributing to the neutral overall outlook.”
Employment stable
The survey’s Employment Index also stood at 50 in August, indicating stability in the labor market.
“While there is no immediate growth in manufacturing employment, the stability in jobs can be seen as a positive sign, especially given the broader economic uncertainties,” Loh said.
“This stability may reflect that businesses in Jacksonville are cautiously optimistic about their production and demand outlooks, choosing to hold employment steady rather than making significant changes in staffing levels.”
The Jacksonville survey was in line with a national PMI compiled by the Institute for Supply Management, which was at 47.2 in August.
“The national PMI showed a slower contraction compared to previous months, with the ISM noting that demand remains weak, new orders and export orders are declining, and backlogs continue to shrink,” Loh said.
He said Jacksonville businesses are experiencing similar pressures to the rest of the country but the Stocks of Materials Purchased Index for Jacksonville, which was at 54 in August, shows Northeast Florida manufacturers are managing inventories more aggressively.
“These efforts reflect an attempt to balance uncertain demand with the need to keep operations running smoothly,” Loh said.