Georgia manufacturing index slips for second consecutive month

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Georgia PMI drops by 2.8 points KENNESAW, Ga. (June 2, 2011) — Despite a second consecutive…

Georgia (Jun 2, 2011)Georgia PMI drops by 2.8 points

KENNESAW, Ga. (June 2, 2011) — Despite a second consecutive month of manufacturing activity decreases, Georgia’s manufacturing sector  remains strong although somewhat weaker in May, based on the latest report by 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 64.6, down 2.8 points from April’s level of 67.4. The decrease in May is more pronounced than for April with substantial decreases in new orders, production, and employment.

Georgia’s PMI for May is 9.1 points higher than its national counterpart, which recorded 53.5, down 6.9 points from April.

“Georgia’s growth is still relatively strong but May’s drop in new orders and production reveals some weakening from March’s high mark of 67.6,” said Don Sabbarese, professor of economics and director of the Econometric Center at the Coles College of Business. “It is not clear whether May’s lower new orders and production is an early signal of a turning point from the strong growth path that started in February.”

New orders and production were down 6.2 points from their highest readings in 2011 of 74.2 for new orders in April and 75.8 in March.

Highlights of the May PMI include:

  • Production down by 6.2 points, to 67.9
  • New Orders down by 6.2 points to 67.9
  • Hiring down 2.7 points, to 66.7
  • Commodity prices decreased 2.2 points, to 83.3. The lower commodity price reading of 83.3 is the second consecutive decrease in 2011
  • Finished inventory decreased 2.3 points, to 59
  • Supplier delivery time increased 3.5 points, to 58.1

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

 

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Kennesaw State University is the third-largest university in Georgia, offering more than 70 graduate and undergraduate degrees, including doctorates in education, business and nursing, and a Ph.D. in international conflict management. A member of the 35-unit University System of Georgia, Kennesaw State is a comprehensive, residential institution with a growing population of more than 23,400 students from 142 countries.

 




A leader in innovative teaching and learning, Kennesaw State University offers more than 150 undergraduate, graduate and doctoral degrees to its approximately 38,000 students. With 13 colleges on two metro Atlanta campuses, Kennesaw State is a member of the University System of Georgia and the third-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 92 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, and one of the 50 largest public institutions in the country. For more information, visit kennesaw.edu.

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