Key manufacturing index down for August


Manufacturing index, down almost 2 points, shows weakness in production and new orders; employment…

Georgia (Sep 1, 2009)Manufacturing index, down almost 2 points, shows weakness in production and new orders; employment is up, says KSU economics professor


KENNESAW, Ga. (Sept. 1, 2009)  —  Manufacturing activity in Georgia slipped in August, led by decreases in new orders and production, 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 August was 45.4, down 1.9 points from July. The latest numbers indicate that Georgia’s manufacturing sector is struggling to reach a solid footing for growth. Ups and downs in new orders in recent months illustrate that manufacturers still have doubts about a recovery, which led to a sharp drop in production. Production declined by 19.7 points, to 41.7, the lowest reading since February, though new orders dropped by just 4. 5 points, to 50.

“This is starting to sound like a broken record, but the bottom line is that companies remain skeptical about a turnaround in the economy,” said Don Sabbarese, professor of economics and director of the Econometric Center at the Coles College of Business. “The dramatic drop in production means that manufacturers are not confident about a recovery anytime soon.”
The best news was that employment went up by 11.9 points, to 43.8. This, however, did not signal new hiring, just a decrease in the percent of companies reducing their work force. Only 4.2 percent of survey respondents hired new workers in August, Sabbarese said.
Highlights of the August PMI include:
·        41.7 percent of survey respondents reported lower production for August, up from only 22.7 percent in July
·        16.7 percent of respondents reported lower employment for August, down from 40.9 in July
·        37.5 percent of respondents reported lower finished inventory for August, up from 31.8 percent in July
·        Commodity prices went up by 15.1 points, to 58.3, the highest level in a year
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 August was up 4 points, to 52.9 percent, after 18 consecutive months of readings below 50.
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 August PMI, or to speak with professor Sabbarese, please call (770) 423-6094. 
Kennesaw State University is the third-largest university in Georgia, offering more than 70 graduate and undergraduate degrees, including new doctorates in education, business and nursing. 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 22,500 from 142 countries.


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