Key manufacturing index up for December


    Georgia manufacturing index (PMI) up 2.4 points from November due to increases…

Georgia (Jan 5, 2010) —  


Georgia manufacturing index (PMI) up 2.4 points from November due to increases in employment and finished inventory, says KSU economics professor. Though manufacturing still weak, index is up 10.5 points for 2009

KENNESAW, Ga. (Jan. 5, 2010)  —  Manufacturing activity in Georgia expanded in December due to solid gains in employment and finished inventory, 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 December was 45.9, up 2.4 points from November. The latest numbers indicate that Georgia’s manufacturing sector is slowly improving, but at a slower pace than the national manufacturing sector.
“Georgia manufacturers are still not convinced that stronger economic growth across the country is leading to more sustainable growth for their markets,” said Don Sabbarese, professor of economics and director of the Econometric Center at the Coles College of Business. “Though the numbers show some improvement, manufacturers are still cautious.”
There is some optimism, however. Some 51 percent of Georgia PMI survey respondents –– up from 47.8 percent in November –– expect to increase their production in the next three to six months, Sabbarese said. This is up from 32.1 percent in October.
For calendar year 2009, the Georgia PMI showed significant gains after reaching bottom in December 2008, with a reading of 26.8. The Georgia PMI rose by 10.5 points in 2009, up from 35.4 in January. At 45.9, the December PMI was the same as its six-month average. The PMI, however, still shows contraction in the manufacturing sector and remains volatile.
Highlights of the December PMI include:
·         Employment remains weak at 45.1, despite a rise of 3.8 points. Only 9.8 percent of survey respondents reported an increase in hiring and 19.5 percent are still laying off workers
·         New orders slipped slightly, by 0.3 of a point, to 47.6. Some 31.7 percent of respondents reported higher new orders in November, while 36.6 percent reported lower orders
·         Production declined by 6.1 points, to 43.9, as only 26.8 percent of respondents reported higher production while 39 percent reported lower production
·         Commodity prices increased by 2.8 points to 65.9, the highest reading for 2009
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 December was 55.9 percent, up 2.3 points from November.
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 December PMI, or to speak with professor Sabbarese, please call (770) 423-6094. 


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