Georgia Purchasing Managers Index (PMI) for July shows continuing weakness in manufacturing

Manufacturing activity in Georgia remained unchanged for the month of July‚ with no clear…

Georgia (Aug 4, 2008) — Georgia Purchasing Managers Index (PMI) for July shows continuing weakness in manufacturing

Aixa Pascual

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

Georgia Purchasing Managers Index (PMI) for July shows continuing weakness in manufacturing
Latest reading remains unchanged from June; production drops sharply‚ commodity prices slide after months of increases‚ says KSU economics professor


KENNESAW‚ Ga.‚ (Aug. 4‚ 2008) — Manufacturing activity in Georgia remained unchanged for the month of July‚ with no clear signs of sustainable growth for 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 July was 49.6‚ the same level as in June. The reading indicates some stability‚ but also highlights continued weakness in manufacturing.

The latest Georgia figure reinforces a trend reflecting weakness in the manufacturing sector that has been apparent since December 2007. April’s PMI of 57.0 continues to look like an anomaly‚ with the last three months stabilizing around the average of 49.2 for the first three months of the year‚ said Don Sabbarese‚ professor of economics and director of the Econometric Center at the Coles College of Business.

“There’s a lot of uncertainty‚” Sabbarese said. “The manufacturing sector doesn’t see a long−term sustainable trend.”

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 50 percent‚ unchanged from June.

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.

Behind the Georgia PMI are monthly adjustments in all the variables‚ with production‚ down 10.7 points‚ experiencing the greatest change. This suggests that manufacturers are continuously reacting to monthly changes‚ with no clear expectations that they are sustainable in the long run.

New orders for July dropped 3.6 points‚ resulting in a drop in production. July’s underlying PMI variables adjusted to an unusually high reading for new orders and production in June. Employment increased by 1.8 points.

“Employment improved slightly but remains relatively weak at 41.1 points and much lower than the national reading of 51.9. I just don’t think manufacturers‚ given current economic conditions‚ are interested in hiring full−time workers‚” Sabbarese said. “We expect manufacturers to continue to be very vigilant.”

The commodity price reading of 89.3 for the July Georgia PMI is down 3.6 points from June. This is the first time commodity prices drop since March 2008‚ Sabbarese said. Commodity prices had been rising for months‚ reaching a high of 92.9 for June‚ the highest level since 1991‚ when the Econometric Center first started compiling the data. High commodity prices pose a concern for higher inflation and lower corporate profits.

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 July PMI or to schedule an interview with Professor Don Sabbarese‚ please contact Aixa M. Pascual at 678−797−2549 or apascual@kennesaw.edu.

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A member of the 35−unit University System of Georgia‚ Kennesaw State University is a comprehensive‚ residential institution with a growing student population of more than 20‚000 from 142 countries. The third−largest university in Georgia‚ Kennesaw State offers more than 65 graduate and undergraduate degrees‚ including doctorates in education and business.


 

A leader in innovative teaching and learning, Kennesaw State University offers more than 150 undergraduate, graduate and doctoral degrees to its approximately 41,000 students. With 11 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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