Georgia manufacturing index rebounds after three-month decline

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Purchasing Managers Index is up 6 points for November, says KSU economics professor KENNESAW, Ga…

Georgia (Dec 2, 2010)

KENNESAW, Ga. (Dec. 2, 2010) —  Manufacturing activity in Georgia rebounded in November after three consecutive months of decline, 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 November was 56.3, up 6 points from the previous month’s level of 50.3. The latest reading reverses the PMI’s 13-point drop from May to October. All of the PMI’s underlying variables for November, except for production, were above their six-month averages.
 
“The improvement in November’s manufacturing numbers has at least temporarily realigned Georgia with the national PMI,” said Don Sabbarese, professor of economics and director of the Econometric Center at the Coles College of Business. “These two readings had been diverging for a while, with substantial differences in their underlying variables.”
Some 46 percent of respondents surveyed said they expected higher production in the next three to six months, compared to 21 percent in October, said Sabbarese.
 
Highlights of the November PMI include:
·        New orders were up by 11.3 points, to 57.8
·        Production increased 4.8 points, to 53.1  
·       Hiring is up 4.5 points, to 56.3. Some 25 percent of respondents reported higher employment, compared to 13.8 percent   in     October
·        Commodity prices remain flat, with a 0.3-point increase to 64.1
·        Finished inventory ticked up 4.8 points, to 53.1
·        Supplier delivery time was up 4 points, to 60.9, which is consistent with the increases in new orders and production 
 
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 November was 56.6, down 0.3 point from October.
 
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 November PMI, or to speak with professor Sabbarese, please call 770-423-6094. 
 
 


 

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