Georgia manufacturing index falls in August

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  Georgia PMI down 2.9 points for August — at the lowest level since January –…

Georgia (Sep 1, 2010)

Georgia PMI down 2.9 points for August — at the lowest level since January –– as new orders, production and employment weaken, says KSU economics professor
KENNESAW, Ga. (Sept. 1, 2010) —  Manufacturing activity in Georgia dipped in August, as new orders and production showed double-digit declines, 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 August was 55, down 2.9 points from July’s reading of 57.9. The August reading is the lowest since January, when the PMI was at 46.1. Georgia’s manufacturing remains relatively strong, but off from its pace in the second quarter of 2010.
 
“The August numbers may reflect a slowdown in the manufacturing sector, but it’s too early to tell,” said Don Sabbarese, professor of economics and director of the Econometric Center at the Coles College of Business. “The national PMI was up by nearly a point in August, which may suggest that Georgia’s manufacturing sector is experiencing a little more volatility. At this point it doesn’t look like a trend reversal.”
 
The decline in the PMI, after months of ups and downs, reflects a decline of 11 points in new orders to 53.3, the lowest level in 2010, and a dip of 13 points in production.
 
Manufacturers are feeling uncertain about the future. Some 23 percent of survey respondents said they expected higher production in the next three to six months, down from 32 percent in July, said Sabbarese. Sixteen percent expect production to be lower than their current levels.
 
Highlights of the August PMI include:
·        Employment was down 9.2 points, to 53.3, the lowest level since January. Only 23.3 percent of survey respondents reported an increase in hiring
·        New orders have slipped the most in the last two months, with an average of 58.8 versus 71.1 for the second quarter
·        Production for July and August averaged is 63.2, versus 63.6 for the second quarter
·        Commodity prices declined in August, with a 2.4-point drop to 58.3, well below the 72.4 average for the first six months of 2010
·        Finished inventory increased 12.3 points, to 53.3. Finished inventory has been volatile for the last five months
·        Supplier delivery time went up 6.5 points, to 58.3 
 
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 56.3, up 0.8 of a point from July, and marked the 13th consecutive month of expansion.
 
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 August PMI, or to speak with professor Sabbarese, please call (770) 423-6094. 
 


 

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