Georgia manufacturing index falls to lowest level since January


PMI drops 3.3 points as new orders and production decline KENNESAW, Ga. (Nov. 1, 2010) …

Georgia (Nov 2, 2010)PMI drops 3.3 points as new orders and production decline

KENNESAW, Ga. (Nov. 1, 2010) —  Manufacturing activity in Georgia fell for the third consecutive month in October, 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 October was 50.3, down 3.3 points from the previous month’s level of 53.6. The latest reading is the lowest since January, when it stood at 46.1, and is 5.9 points below the PMI’s six-month average.
“The latest numbers are consistent with the gradual slowdown in manufacturing activity that started in June,” said Don Sabbarese, professor of economics and director of the Econometric Center at the Coles College of Business. “Contraction in commercial and residential construction and the slow rebound in economic activity are contributing to the PMI’s slowdown.”
Some 21 percent of survey respondents said they expected higher production in the next three to six months, compared with 27 percent of respondents expecting lower production, said Sabbarese.
Hiring experienced an increase of 3.7 points, to 51.7. All of the PMI’s underlying variables, except for finished inventory, were below their six-month averages.
Highlights of the October PMI include:
  • New orders were down by 5.4 points, to 46.6
  • Production declined 3.7 points, to 48.3  
  • Commodity prices increased 5.8 points, to 63.8, the first increase in three months
  •  Finished inventory declined 3.7 points, to 48.3
  •  Supplier delivery time decreased 7.1 points, to 56.9. This decrease is consistent with the drop in new orders and production
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 October was 56.9, up 2.5 points from September.
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 October PMI, or to speak with professor Sabbarese, please call 770-423-6094. 


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