Georgia manufacturing index improves slightly in July
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.
A leader in innovative teaching and learning, Kennesaw State University offers more than 150 undergraduate, graduate and doctoral degrees to its approximately 41,000 students. With 11 colleges on two metro Atlanta campuses, Kennesaw State is a member of the University System of Georgia and the third-largest university in the state. The university’s vibrant campus culture, diverse population, strong global ties and entrepreneurial spirit draw students from throughout the region and from 92 countries across the globe. Kennesaw State is a Carnegie-designated doctoral research institution (R2), placing it among an elite group of only 6 percent of U.S. colleges and universities with an R1 or R2 status, and one of the 50 largest public institutions in the country. For more information, visit kennesaw.edu.
