Georgia Purchasing Managers Index (PMI) for August is down from July

Latest reading shows sharp drop in new orders‚ continued weakness in employment; commodity prices…

Georgia (Sep 3, 2008) — Georgia Purchasing Managers Index (PMI) for August is down from July

Aixa M. Pascual

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Contact: Aixa M. Pascual‚ 678−797−2549 or
apascual@kennesaw.edu

Georgia Purchasing Managers Index (PMI) for August is down from July
Latest reading shows sharp drop in new orders‚ continued weakness in employment; commodity prices slide after months of increases‚ says KSU economics professor


KENNESAW‚ Ga.‚ (Sept. 2‚ 2008) — Manufacturing activity in Georgia declined further in the month of August‚ with no clear signs of a turnaround in the near future‚ according to the Econometric Center at Kennesaw State University’s Michael J. Coles College of Business.

Georgia’s Purchasing Managers Index (PMI) — a reading of economic activity in the state’s manufacturing sector — for August was 47.9‚ a decline of 1.7 points from July. The reading indicates continued weakness in manufacturing.

Employment’s steady but low reading of 41.7‚ up 0.6 points from July‚ is the best indicator that Georgia manufacturers are still waiting for more consistently solid signs of improvement before they start hiring more workers. Only 4.2 percent of survey participants added new workers to their workforce‚ said Don Sabbarese‚ professor of economics and director of the Econometric Center at the Coles College of Business.

“Uncertainty is still the operative word for the manufacturing sector‚” Sabbarese said. “Manufacturers selling primarily in the domestic market will remain cautious for the remainder of this year.”

The Georgia PMI provides a snapshot of manufacturing activity in the state‚ just as the monthly PMI released by the Institute for Supply Management provides a picture of national manufacturing activity. A PMI reading above 50 indicates that manufacturing activity is expanding. A reading below 50 indicates the manufacturing industry is contracting.

The latest Georgia figure reinforces a trend for both Georgia and the nation as both surveys are converging at a measure of 50. The national PMI registered 49.9 percent‚ barely changed from 50 in July.

The Georgia PMI reading is a composite of five variables — new orders‚ production‚ employment‚ supply deliveries and finished inventory. A sixth variable‚ commodity prices‚ is compiled by the Coles College’s Econometric Center but doesn’t go into the PMI calculation.

August’s underlying PMI variables do not reveal a long−term‚ sustainable trend.

For August‚ substantial declines in new orders (−7.7 points) and supply deliveries (−14.1) were the main contributors to the 1.7 point drop in the PMI‚ with a production increase of 7.1 points offsetting the declines. This is a typical pattern when uncertainty about new orders prevails. Employment increased by just 0.6 points.

“Employment remains weak at 41.7‚ slightly up from 41.1.Employment in Georgia remains well below the national PMI employment of 49.7. Employment is considered a lagging indicator and‚ until it begins to show some sustainable improvement‚ it suggests that the economy is not close to recovering‚” Sabbarese said. “Georgia’s manufacturers show no sign that we are close to rebounding.”

The commodity price reading of 66.7 for the August PMI is down 22.6 points from July. This substantial drop in commodity prices means that the slight drop in commodity prices reported in July could be the beginning of a long awaited relief by manufacturers‚ Sabbarese said. Manufacturers in general have struggled with high material costs and their ability to pass them on to their customers. August’s adjustment was substantial‚ with 32.7 percent fewer manufacturers reporting higher commodity prices than in July.

The PMI‚ compiled from a monthly survey of manufacturers‚ is the earliest indicator of market conditions in the sector. Since manufacturing is sensitive to changes in the economy‚ it can also reveal changing macroeconomic trends‚ even if manufacturing accounts for only 13 percent of gross domestic product (GDP).

The PMI’s value is in its timeliness and sensitivity to variables such as interest rates‚ global markets and other economic changes. The Georgia PMI provides valuable data used by institutions such as the Federal Reserve Bank of Atlanta to assist in their analysis of current economic conditions‚ along with many other data sources‚ to get a picture of economic activity.

For a full report of the August PMI or to schedule an interview with Professor Don Sabbarese‚ please contact Aixa M. Pascual at 678−797−2549 or at apascual@kennesaw.edu

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Kennesaw State University is the third−largest university in Georgia‚ offering more than 65 graduate and undergraduate degrees‚ including new doctorates in education and business. A member of the 35−unit University System of Georgia‚ Kennesaw State is a comprehensive‚ residential institution with a growing student population of more than 21‚000 from 142 countries.





A leader in innovative teaching and learning, Kennesaw State University offers more than 150 undergraduate, graduate and doctoral degrees to its approximately 38,000 students. With 13 colleges on two metro Atlanta campuses, Kennesaw State is a member of the University System of Georgia and the third-largest university in the state. The university’s vibrant campus culture, diverse population, strong global ties and entrepreneurial spirit draw students from throughout the region and from 92 countries across the globe. Kennesaw State is a Carnegie-designated doctoral research institution (R2), placing it among an elite group of only 6 percent of U.S. colleges and universities with an R1 or R2 status, and one of the 50 largest public institutions in the country. For more information, visit kennesaw.edu.

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