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


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