Georgia manufacturing index slips in May
Georgia PMI shows continued strength despite first dip in five months, says KSU economics…
Georgia
(Jun 1, 2010) —
Georgia PMI shows continued strength despite first dip in five months, says KSU economics
professor
KENNESAW, Ga. (June 1, 2010) — Manufacturing activity in Georgia remained strong for May, even as it slipped by a
fraction of 1 point, 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 May was 63.2, down just 0.1 of a point from April’s
reading of 63.3, marking the index’s first slip in the last five months. The May PMI,
7.2 points above the index’s six-month average, shows that the number of manufacturers
experiencing improved market conditions remains high and sustainable. An encouraging
sign: Employment, up 2.5 points to 62.5, is at its highest point since May 2006.
“It is very encouraging that employment continues to climb steadily,” said Don Sabbarese,
professor of economics and director of the Econometric Center at the Coles College
of Business. “Swings in the PMI from month to month are to be expected. But the general
trend is upward and very positive, with an increasing number of manufacturers experiencing
improved market conditions.”
Sabbarese says the rise in manufacturing’s fortunes should spread soon to other areas
of the economy. “If this upward trend continues,” he explains, “we should see improvements
in other sectors of the economy very soon.”
Highlights of the May PMI include:
· New orders for May were down by 3.5 points, to 73.2, but remain strong. Some 53.6
percent of survey respondents reported higher new orders, down by 9.8 points from
April, but only 7.1 percent of respondents reported a decline in orders
· Though production slipped 2.3 points, to 66.1, it remains at very high levels, at
7.5 points above its six-month average
· Hiring continued to improve in May, with 28.6 percent of survey respondents –– an
increase of 8.6 points over April –– hiring. Employment has risen by almost 20 points
–– from 43.4 to 62.5 –– since January
· Commodity prices fell significantly, by 6.5 points, to 76.8, the first substantive
decline since July 2009. Some 57.1 percent of respondents reported higher prices,
compared to 66.7 percent for April
· Finished inventory declined 3.6 points, to 46.4. Inventories should turn around in
the near future
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 May was 59.7 points, down 0.7 from April.
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 May PMI, or to speak with professor Sabbarese, please call
(770) 423-6094.
By Aixa M. Pascual
A leader in innovative teaching and learning, Kennesaw State University offers undergraduate, graduate and doctoral degrees to its more than 41,000 students. With 11 colleges on two metro Atlanta campuses, Kennesaw State is a member of the University System of Georgia and the second-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 126 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. For more information, visit kennesaw.edu.
