Georgia manufacturing index for April rises again

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  Georgia PMI shows continued improvement, with third consecutive month of above-50 readings,…

Georgia (May 4, 2010) —  

Georgia PMI shows continued improvement, with third consecutive month of above-50 readings, says KSU economics professor
KENNESAW, Ga. (May 3, 2010) — Manufacturing activity in Georgia continued to show strong signs of improvement in April as manufacturers experienced an uptick in new orders, 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 April was 63.3, up 2.0 points from March, marking the third consecutive month of readings above 50 points. The April PMI is 10.6 points above the index’s six-month average and shows that more and more manufacturers are doing better. New orders are looking strong, with 21 percent more survey respondents reporting higher new orders since the beginning of the year.
 
“With each passing month, the recovery in manufacturing is getting stronger and more sustainable,” said Don Sabbarese, professor of economics and director of the Econometric Center at the Coles College of Business. “We are very encouraged with the gains that we are seeing. If this upward trend continues, we should see improvements in other sectors of the economy very soon.”
 
Highlights of the April PMI include:
 
·         New orders, up by 15.4 points to 76.7, showed strong gains, with 63.3 percent of respondents reporting higher new orders and only 10 percent reporting lower new orders
·         Hiring continues to improve since January, with 20 percent of survey respondents doing more hiring, compared to 5.3 percent in January
·         Though production slipped 4.2 points, to 68.3, it still remains at very high levels. Some 46.7 percent of survey respondents reported an increase in production, compared to 10 percent of respondents reporting a decline in production
·         Commodity prices remain high, rising by 1.1 points to 83.3. Some 66.7 percent of respondents reported higher prices, compared to zero respondents reporting lower commodity prices. This does not seem to be a problem for manufacturers yet, with declines in labor costs and higher productivity, but will be when these positive trends reverse
·         Finished inventory declined 6.5 points, to 50, not unusual as new orders showed gains
 
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 April was 60.4 points, up 0.8 point from March.
 
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 April PMI, or to speak with professor Sabbarese, please call (770) 423-6094. 
 


 

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