Georgia Purchasing Managers Index (PMI) for December continues sharp decline

PMI reading at lowest level since 1990; production‚ employment and commodity prices slide further‚…

Georgia (Jan 6, 2009) — Georgia Purchasing Managers Index (PMI) for December continues sharp decline

Aixa Pascual

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Georgia Purchasing Managers Index (PMI) for December continues sharp decline

PMI reading at lowest level since 1990; production‚ employment and commodity prices slide further‚ says KSU economics professor

KENNESAW‚ Ga.‚ (Jan. 5‚ 2009)
— Manufacturing activity in Georgia continued to slide in December‚ reaching its lowest level since the monthly survey was launched in 1990‚ 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 December was 26.8‚ a decline of 5.9 points from November. This reading is consistent with the last recession in 2001 and augurs an even sharper drop in fourth quarter Gross Domestic Product (GDP) than the 0.3 percent contraction registered in the third quarter.

“The latest numbers reveal just how broad this downturn extends across the manufacturing sector‚” said Don Sabbarese‚ professor of economics and director of the Econometric Center at the Coles College of Business. “As illustrated also by national data‚ the weakness is not only broad but also deep across the manufacturing sector.”

Manufacturing employment in Georgia dropped by 18.2 points to 20.5‚ its lowest level since 1990. Production‚ which shrank by 9.1 points to 18.2‚ also reached its lowest level. New orders were up by 2.3 points‚ to 22.7. However‚ 63.6 percent of survey participants reported lower new orders and only 9.1 percent reported higher new orders.

The extremely low level of new orders continues to strain revenue and profits‚ forcing manufacturing companies to lay off workers and/or not hire. “Many manufacturers are trying to survive by slashing labor costs‚” 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 is in sync with the national PMI for December‚ which declined by 3.8 percent to 32.4‚ its lowest level in 18 years.

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.

As in previous months‚ the only bright spot in the December PMI was the drop in commodity prices‚ which lowers production costs for manufacturers. Commodity prices declined by 4.5 points‚ to 18.2‚ a historical low. However‚ the broad decrease in commodity prices indicates excess capacity‚ which reflects the sharp drop in global demand.

The PMI‚ compiled from a monthly survey of manufacturers‚ is the earliest indicator of market conditions in the sector. Since manufacturing –– which accounts for 13 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.

For a full report of the December PMI‚ or to speak with professor Sabbarese‚ please call (770) 423−6094.



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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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