Georgia manufacturing index down for third consecutive month


PMI is down 7.7 points in June as new orders and production tumble KENNESAW, Ga. (July  1,…

Georgia (Jul 1, 2011)PMI is down 7.7 points in June as new orders and production tumble

KENNESAW, Ga. (July  1, 2011) — Manufacturing activity in Georgia fell dramatically in June, capping 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 June was 56.9, down 7.7 points from May’s level of 64.6. The manufacturing index has lost a total of 10.7 points in the last three months.

All of the PMI’s underlying variables fell in June and are below their six-month averages. New orders and production reported sharp decreases.

“Growth in manufacturing has been losing steam lately, especially in the last month,” said Don Sabbarese, professor of economics and director of the Econometric Center at the Coles College of Business.  “But this looks like a transitory soft spot tied to high energy prices and problems in Japan’s supply chain. Over the next two or three months we will know if the declines are short term or will have a longer term impact.”

The decline in Georgia’s PMI contrasts with the June reading of the national PMI, released by the Institute for Supply Management. The national PMI went up by 1.8 points, to 55.3. However, the Georgia PMI is 1.6 points higher than its national counterpart.

Highlights of the June PMI include:

·         Production was down 8.2 points, to 59.7

·         New orders declined 9.6 points, to 58.3 

·         Hiring was down 4.2 points, to 62.5

·         Commodity prices tumbled 8.3 points, to 75

·         Finished inventory decreased 4.8 points, to 54.2

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 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 June PMI, or to speak with professor Sabbarese, please call 770- 423-6094.


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