Georgia PMI for October reverses decline and shows solid gain


Georgia PMI for October reverses decline, shows solid gain Manufacturing index up by 4.3 points…

Georgia (Nov 2, 2009)Georgia PMI for October reverses decline, shows solid gain

Manufacturing index up by 4.3 points after two months of decline due to rise in new orders, production, says KSU economics professor
KENNESAW, Ga. (Nov. 2, 2009)  —  Manufacturing activity in Georgia showed solid gains in October after two consecutive months of decline, led by a big boost in new orders and production, according to the Econometric Center at Kennesaw State University’s Coles College of Business.  

Georgia’s Purchasing Managers Index (PMI) — a reading of economic activity in the state’s manufacturing sector — for October was 48.9, up 4.3 points from September. The latest numbers indicate that while Georgia’s manufacturing sector is still contracting, more and more survey respondents are seeing positive signs. Gains in the index were driven by an increase of 18.8 points in new orders, up to 55.4, and of 9.8 points in production, to 48.2. Though employment slipped by 3.6 points, to 46.4, it is still 5.9 points above its six-month average. 
“The boom in orders and its positive impact on production suggest that Georgia manufacturers are beginning to show some signs of growth,” said Don Sabbarese, professor of economics and director of the Econometric Center at the Coles College of Business. “If new orders continue to go up over the next few months, we may see further growth in production, which would be great news.” 
Highlights of the October PMI include:
·       35.7 percent of survey respondents reported higher new orders in October, more than twice as much as in September
·       28.6 percent of respondents reported higher production, almost twice as much as in September
·       In October, 32 percent of respondents, up from 30 percent in September, said they expect production to increase in the next three to six months
·       Commodity prices remain high at 60.7 –– 8 points above the six-month average –– and 32.1 percent of respondents reported higher prices
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 it is contracting. The national PMI for October was 55.7, up 3.1 points, and above 50 for the third consecutive month.

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 does not go into the PMI calculation.

The PMI, compiled from a monthly survey of manufacturers, is the earliest indicator of market conditions in the sector. Since manufacturing –– which accounts for 12 percent of GDP –– is sensitive to changes in the economy, it can also reveal changing macroeconomic trends. 

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 October PMI, or to speak with professor Sabbarese, please call (770) 423-6094. 


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