Georgia manufacturing index for November reveals lingering weakness and volatility

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Manufacturing index down 5.4 points due to decline in new orders, employment and finished inventory…

Georgia (Dec 2, 2009)Manufacturing index down 5.4 points due to decline in new orders, employment and finished inventory, says KSU economics professor

 KENNESAW, Ga. (Dec. 2, 2009)  —  Manufacturing activity in Georgia slipped in November after solid growth the previous month, 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 November was 43.5, down 5.4 points from October.
 
The latest numbers indicate that Georgia’s manufacturing sector remains weak and volatile. The PMI shrank in November –– after a gain of 4.3 points in October –– due to a sharp decline in new orders, leading to drops in employment and finished inventory.
 
“Manufacturers have no confidence that their markets are on the rebound,” said Don Sabbarese, professor of economics and director of the Econometric Center at the Coles College of Business. “They can’t get a firm handle on where demand is going and are reluctant to hire more workers.”
 
There is, however, a silver lining in the November report, Sabbarese explained. Some 47.8 percent of survey respondents –– up from 32.1 percent in October –– expect their production to increase in the next three to six months, while only 26 percent expect it to decline. 
 
Highlights of the November PMI include:
 
·         Employment remains weak, with only 8.7 percent of survey respondents reporting an increase in hiring, while 26.1 percent are still laying off workers
·         34.8 percent of survey respondents reported higher new orders in November, but 39.1 percent reported lower orders
·         34.8 percent of respondents reported higher production, the same percent as respondents who reported lower production
·         Commodity prices remain high at 63 –– 7.3 points above the six-month average –– and no respondents reported lower 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 November was 53.6, down 2.1 points from October.
 
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 11 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. 

 

 


 

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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