Georgia manufacturing index improves slightly in July

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  Gains driven mostly by production rebound as Purchasing Managers Index (PMI) remains strong…

Georgia (Aug 2, 2010) —  

Gains driven mostly by production rebound as Purchasing Managers Index (PMI) remains strong, says KSU economics professor
KENNESAW, Ga. (Aug. 2, 2010) —  Manufacturing activity in Georgia grew by half a point in July, driven by a jump in production, 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 July was 57.9, up 0.5 point from June’s reading of 57.4. Though the reading came in below pre-summer levels, July’s PMI remains strong and sustainable. The July reading is two points below the PMI’s six-month average of 59.9.
 
“The latest numbers reflect some uncertainty going forward and suggest that manufacturers may be growing more cautious,” said Don Sabbarese, professor of economics and director of the Econometric Center at the Coles College of Business. “But the fact that manufacturing didn’t continue to decline is a positive sign, even as the overall economy is showing signs of slowing down.”
 
New orders and employment dropped even as production grew by 13.2 points and deliveries moved faster.
Some 32 percent of survey respondents said they expected higher production in the next three to six months, down from 34 percent for June, said Sabbarese. Eleven percent expect production to be lower than their current levels.
 
Highlights of the July PMI include:
  • New orders for July were down by 0.2 point, to 64.3, but remain strong. Some 53.6 percent of survey respondents reported higher new orders, while 25 percent reported lower orders
  • Production increased by 13.2 points, to 69.6. This more than offset a nearly 10-point drop for June
  • Hiring remained strong at 62.5, 2 points down from June. Some 39.3 percent of respondents reported increased hiring, while 14.3 percent reported less hiring
  • Commodity prices reversed a sharp drop of 23.6 points, with a 7.5-point increase in July to 60.7, but still well below April’s reading of 83.3
  • Finished inventory increased 5.6 points to 41.1 This is consistent with the jump in production
  • Supplier delivery time, which had been relatively stable, fell 14.3 points. The percent of respondents reporting slower delivery dropped from 35.5 percent to 10.7 percent
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 July was 55.5, down 0.7 point from June.
 
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 July PMI, or to speak with professor Sabbarese, please call (770) 423-6094. 
 


 

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