Georgia manufacturing index at highest level in nearly two years
PMI up by double digits, to highest level since April 2008, due to across-the-board…
Georgia
(Mar 1, 2010) —
PMI up by double digits, to highest level since April 2008, due to across-the-board
improvements, says KSU economics professor
KENNESAW, Ga. (March 1, 2010) — Manufacturing activity in Georgia improved substantially in February, recording its
highest reading since April 2008, 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 February was 56.4, up an impressive 10.3 points
from January, as new orders, production, employment and finished inventory all showed
strong gains. February’s 56.4 reading is 8.8 points above the PMI’s six-month average
and is more in line with the national PMI, which recorded 56.5 for February.
“Manufacturing activity grew by leaps and bounds in February,” said Don Sabbarese,
professor of economics and director of the Econometric Center at the Coles College
of Business. “The gains in employment, finished inventory and other variables were
very strong. This may be the shot in the arm that Georgia manufacturers were waiting
for.”
But it is still too early to tell if this upward trend is sustainable. “We don’t know
yet if this is an aberration, given the PMI’s consistent readings under 50 for the
past two years,” Sabbarese said. “Should this trend continue for another two or three
months, it would give a clearer signal that these manufacturers are on their way to
a stronger recovery.”
Highlights of the February PMI include:
· Finished inventory showed substantial improvement, growing by 21.1 points to 50. The
percentage of survey respondents reporting higher inventory grew to 24.2, up from
5.3 in January. This could be the beginning of a long-term inventory buildup.
· Employment was up 11.1 points, to 54.5, the highest reading since July 2007. Employment
finally rose above 50, with 18.2 percent of survey respondents hiring more workers
and only 9.1 percent showing a decline in employment. Employment is 7.7 points above
its six-month average.
· New orders jumped by 7.3 points, to 65.2. Some 45.5 percent of respondents reported
higher orders, and only 15.2 percent reported a decline in new orders.
· Production more than matched new orders, rising by 11.3 points to 56.1. Only 18.2
percent of respondents saw a decline in production, compared to 36.8 in January. Some
30.3 percent reported a rise in production for February.
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 February was 56.5, down 1.9 points from January.
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.
For a full report of the February PMI, or to speak with professor Sabbarese, please
call (770) 423-6094.
A leader in innovative teaching and learning, Kennesaw State University offers undergraduate, graduate and doctoral degrees to its more than 41,000 students. With 11 colleges on two metro Atlanta campuses, Kennesaw State is a member of the University System of Georgia and the second-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 126 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. For more information, visit kennesaw.edu.
