Manufacturing activity in Georgia down for May‚ according to Purchasing Managers Index at Kennesaw State

Manufacturing activity in Georgia was down significantly for the month of May‚ according to the…

Georgia (Jun 3, 2008) — Manufacturing activity in Georgia down for May‚ according to Purchasing Managers Index at Kennesaw State

Aixa Pascual

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

Georgia Purchasing Managers Index (PMI) for May is down 8.2 points from April
Latest reading is more in line with Georgia figures for first quarter of 2008; commodity prices reach highest level in years‚ says KSU economics professor


KENNESAW‚ Ga.‚ (June 3‚ 2008) — Manufacturing activity in Georgia was down significantly for the month of May‚ 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 May was 48.8‚ down 8.2 points from 57.0 in April and indicating a contraction in manufacturing activity.

The latest Georgia figure is more in line with readings for the Georgia PMI for the first three months of 2008‚ when it averaged 49.2. April’s PMI of 57.0 appears to be an anomaly‚ said Don Sabbarese‚ professor of economics and director of the Econometric Center at the Coles College of Business.

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 Georgia May PMI‚ which realigned with the national PMI reading of 49.6‚ underscores the economy’s slow growth.

“The manufacturing sector‚ at best‚ keeps growing at a very slow pace‚” Sabbarese said. “What’s happening is there’s a lot of uncertainty around manufacturers. They’re on the edge. It’s just not clear if the market is going to increase substantially or slow down more.”

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.

The commodity price reading of 92 for the May Georgia PMI is one of the highest recorded going back to 1991‚ when the Econometric Center first started compiling the data‚ Sabbarese said. Commodity prices have increased 23.8 points since December‚ the sharpest increase for a six−month period. Some 84 percent of manufacturers surveyed reported higher commodity prices from the previous month.

Rising commodity prices not only raise manufacturers’ costs and cut into profits‚ but also affect hiring policies. As higher commodity prices take a bite out of earnings‚ businesses typically try to lower their labor costs through measures such as hiring freezes.

A slip of 5.7 points in new orders for the month of May translated into a decline of 13.7 points in employment and 12.7 points in finished inventory.

“The employment picture is still very weak for the manufacturing sector. Manufacturing jobs are not growing‚” Sabbarese said.

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 that the Federal Reserve Bank of Atlanta analyzes‚ along with many other data sources‚ to get a picture of economic activity.

For a full report of the May 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 new 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 more than 41,000 students. With 11 colleges on two metro Atlanta campuses, Kennesaw State is a member of the University System of Georgia and the second-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 126 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. For more information, visit kennesaw.edu

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