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
Abstract
Director of University Relations
Frances Weyand Harrison
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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.
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 undergraduate, graduate and doctoral degrees to its nearly 43,000 students. With 11 colleges on two metro Atlanta campuses, Kennesaw State is a member of the University System of Georgia. The university’s vibrant campus culture, diverse population, strong global ties and entrepreneurial spirit draw students from throughout the country and the world. 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.
