Georgia manufacturing index for January remains flat


  PMI barely up even as new orders jump; employment and finished inventory decline, says KSU…

Georgia (Feb 2, 2010) —  

PMI barely up even as new orders jump; employment and finished inventory decline, says KSU economics professor

KENNESAW, Ga. (Feb. 2, 2010)  —  Manufacturing activity in Georgia showed virtually no growth in January, according to the Econometric Center at Kennesaw State University’s Coles College of Business. The shortfall in growth continues to reveal a lack of confidence on the part of manufacturers, who remain reluctant to increase hiring and production.

Georgia’s Purchasing Managers Index (PMI) — a reading of economic activity in the state’s manufacturing sector — for January was 46.1, up 0.2 of a point from December 2009. January’s reading is just 0.3 of a point above the index’s six-month average. Georgia’s PMI continues to underperform relative to the national PMI, a trend that began in June 2009 and has continued to exacerbate. Employment, production and finished inventory remain weak even as new orders showed an uptick.
“Georgia manufacturers are still searching for consistent growth to increase their production and hiring,” said Don Sabbarese, professor of economics and director of the Econometric Center at the Coles College of Business. “The jump in new orders without a similar increase in production –– and a sharp drop in finished inventory ––  speaks volumes to the fact that Georgia’s manufacturing rebound has been slow to start. Confidence is very low.”
Even future expectations slipped, a reversal from the past few months, Sabbarese said. Forty-two percent of respondents reported they expect higher production in the next three to six months, down from 47 percent in December.
Highlights of the January PMI include:
·         Employment remains weak, with a decline of 1.7 points, to 43.4. Only 5.3 percent of respondents hired new workers, while 18.4 reported workforce reductions
·         New orders jumped 10.3 points, to 57.9. Some 42.1 percent of respondents reported a rise in new orders, up from 31.7 percent in December, while 26.3 percent of respondents reported lower orders
·         Production barely improved, growing by 0.8 of a point, to 44.7 points. Some 26.3 percent of respondents reported higher production, while 36.8 percent reported lower production
·         Finished inventory fell 11.3 points, to 28.9 points, from an already low level of 40.2
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 January was 58.4 points, up 3.5 points from December 2009.
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 January PMI, or to speak with professor Sabbarese, please call (770) 423-6094. 


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