Georgia manufacturing index reveals continued weakness


October index declines 5.5 points KENNESAW, Ga.  (Nov. 1, 2011) — Manufacturing…

Georgia (Nov 1, 2011)October index declines 5.5 points

KENNESAW, Ga.  (Nov. 1, 2011) — Manufacturing activity in Georgia fell sharply for the second consecutive month, accordingto 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 October was 43.2, down 5.5 points from September. The PMI has continued to  decline since June, only going up in August. Finished inventory declined 19.3 percent, to 29, with 48 percent of respondents reporting lower inventories.

“What was once believed to be a soft spot appears to be more pervasive,” said Don Sabbarese, professor of economics and director of the Econometric Center at the Coles College of Business. “The decline in inventories signals that inventories are being adjusted to match the substantial reduction in new orders and production. Georgia’s relatively slower economic recovery may be responsible for these weaker manufacturing numbers.”

Other highlights of the October PMI include:

·         New orders increased 3.4 points, to 48.4

·         Production decreased 3.1 points, to 43.5

·         Employment decreased 3.2 points, to 46.8

·         Supplier delivery time decreased 4.9 points, to 48.4

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 has experienced a slowdown similar to Georgia’s but was 7.6 points higher in October, at 50.8, than Georgia’s.

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.


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