Georgia Purchasing Managers Index (PMI) for January reverses long decline

New orders‚ production and employment are up; commodity prices increase after a four−month…

Georgia (Feb 6, 2009) — Georgia Purchasing Managers Index (PMI) for January reverses long decline

Aixa Pascual

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Georgia Purchasing Managers Index (PMI) for January reverses long decline
New orders‚ production and employment are up; commodity prices increase after a four−month decline‚ says KSU economics professor

KENNESAW‚ Ga.‚ (Feb. 4‚ 2009)
— Manufacturing activity in Georgia showed some improvement from a steep decline that started last summer and hit bottom in December‚ 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 January was 35.4‚ an increase of 8.6 points from December. This reading was supported by healthy increases in new orders‚ production‚ employment and finished inventory.

“The latest PMI signals a possible turnaround from its low point in December‚” said Don Sabbarese‚ professor of economics and director of the Econometric Center at the Coles College of Business. “But‚ at the same time‚ the reading paints a picture of a very weak manufacturing sector.”

More survey participants reported higher levels of new orders and production in January than they did in the last five months. New orders were up by 10 points‚ to 32.7.

While it is encouraging to see a rise in new orders‚ the fact remains that only 19.2 percent of participants reported higher new orders‚ Sabbarese said. Unless more participants report increases in the coming months‚ this improvement may not be sustainable. Until then‚ the manufacturing sector remains in a state of contraction.

Production also edged higher‚ expanding by 10.7 points to 28.8. More participants also reported higher employment –– which was up by 14.2 points –– but it remains very weak at 34.6. Employment is not expected to increase much over the next few months.

“Many manufacturers today are operating at minimal levels and will respond to short−run upticks in business while remaining cautious in the long term‚” 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 mirrors the national PMI for January‚ which remains weak at 35.6‚ an increase of 2.7 points.

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.

After four months of steady decline‚ commodity prices reversed direction in January‚ increasing by 12.6 points to 30.8.The excess supply of commodities may be slowly rebalancing. Commodity prices still remain at a relatively low level‚ indicating excess capacity created by 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‚ to get a picture of economic activity.

For a full report of the January 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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