Georgia manufacturing index for March rises again

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Georgia PMI shows strong signs of improvement, with second consecutive month of above-50 readings,…

Georgia (Apr 1, 2010)Georgia PMI shows strong signs of improvement, with second consecutive month of above-50 readings, says KSU economics professor

KENNESAW, Ga. (April 1, 2010)  —  Manufacturing activity in Georgia showed strong signs of growth in March, according to the Econometric Center at Kennesaw State University’s Coles College of Business. Employment, which had remained weak for months, has started to show solid gains. 
 
Georgia’s Purchasing Managers Index (PMI) — a reading of economic activity in the state’s manufacturing sector — for March was 61.3, up 4.9 points from February. The March PMI is 7 points above the index’s six-month average, and is more in synch with the national PMI. The various variables underlying the Georgia PMI –– new orders, production, employment, supply deliveries and finished inventory –– have improved dramatically in the first three months of the year.
 
In February, the PMI recorded its highest reading since April 2008. The March reading continued to ride on that trend, with the PMI now up 15.2 points for the first three months of 2010.
 
“We are finally seeing signs of solid growth in manufacturing,” said Don Sabbarese, professor of economics and director of the Econometric Center at the Coles College of Business. “Employers are starting to hire with more confidence, and their production is up. This may as well signal the beginning of manufacturing’s recovery after months of sluggishness, and we hope this continues over the next few months.”
 
Highlights of the March PMI include:
 
·         Hiring has gained momentum, with employment up 5.1 points, to 59.7 points
·         Though new orders slipped 3.9 points, to 61.3 points, they are still strong. Some 42 percent of survey respondents reported an increase in new orders, compared to 19.4 of respondents reporting a decline in new orders
·         Production showed the strongest gains, up by 16.5 points, to 72.6 points. More than half of survey respondents reported increases in production. Only 6.5 of respondents reported lower production
·         Commodity prices rose 9.5 points, to 82.3 points, the highest reading since July 2008. Some 64.5 percent of respondents reported higher commodity prices
 
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 March was 59.6, up 3.1 points from February.
 
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 March PMI, or to speak with professor Sabbarese, please call (770) 423-6094. 


 

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