Georgia Purchasing Managers Index (PMI) for September is down sharply

Latest monthly reading shows big declines in new orders‚ production and employment‚ says KSU…

Georgia (Oct 3, 2008) — Georgia Purchasing Managers Index (PMI) for September is down sharply

Aixa Pascual

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

Georgia Purchasing Managers Index (PMI) for September is down sharply
Latest monthly reading shows big declines in new orders‚ production and employment‚ says KSU economics professor


KENNESAW‚ Ga.‚ (Oct. 2‚ 2008) — Manufacturing activity in Georgia contracted sharply in September‚ reinforcing a declining trend evident for the past few months‚ 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 September was 39.6‚ a decline of 8.3 points from August. This reading‚ reflecting a faster rate of decline than in previous months in 2008‚ reveals continued weakness in the manufacturing sector.

Sharp decreases in new orders‚ production and employment yielded a lower PMI reading for September. Production declined by a staggering 21.2 points‚ to 28.8‚ and new orders‚ decreasing for the third straight month‚ were down 13.1 points‚ to 32.7. Employment remains anemic‚ declining by 10.9 points to 30.8‚ with none of the survey participants reporting increased hiring in September‚ said Don Sabbarese‚ professor of economics and director of the Econometric Center at the Coles College of Business.

Georgia manufacturers are dealing not only with a faltering domestic market‚ but also with slower global growth and credit concerns related to the serious credit and liquidity problems facing the banking and financial sector‚ Sabbarese said.

“Current problems in the financial sector are not only magnifying the level of uncertainty‚ but also making it much more likely that these manufacturers’ markets will not improve in the near future‚” Sabbarese said.

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 PMI reinforces a downward trend for both Georgia and the nation as both surveys have fallen well below 50. The national PMI registered 43.5 percent for September‚ a decline of 6.4 points from August.

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.

September’s underlying PMI variables do not offer a clear sign that manufacturing activity will improve anytime soon. The deterioration in new orders over the last three months and simultaneous sharp reductions in production and employment suggest that a large majority of survey participants have no confidence that their current market conditions will change. Broader weakness in the economy and financial sector gives additional credence to this observation.

“Manufacturing employment is frozen‚ with no participants reporting increased hiring for September. This‚ more than any other variable‚ demonstrates the level of pessimism in manufacturing‚” Sabbarese said. “Georgia’s manufacturers show no sign that they see a light at the end of the tunnel.”

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 September 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 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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