Georgia manufacturing activity registers its first increase in six months

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Region gains at slightly faster pace than national index for September but still lags behind

KENNESAW, Ga.  (Oct. 1, 2013) — Georgia’s manufacturing experienced a slight increase – the first increase in six months – due to strong gains in employment, production and supplier delivery time, according to the Purchasing Managers Index (PMI) released today by Kennesaw State University’s Econometric Center in the Michael J. Coles College of Business.

Georgia’s PMI of 49.1 inched closer to 50 with its 0.6 point increase for September, while the National PMI increased 0.5 of a point to 56.2.  Georgia new orders remain volatile as it dropped 9 points in September following a 7-point increase for August, according to Don Sabbarese, director of the Econometric Center and professor of economics at Kennesaw State.  New orders for September were nearly 10 points below the six-month average of 53.

“Georgia’s employment increase of 13.7 points to 58.7 is the most encouraging signal for September, which may suggest these manufacturers anticipate better future market conditions,” said Sabbarese. 

“The August Industrial Production report for national manufacturing, which experienced strong improvement, along with the September National PMI of 56.2 suggests national manufacturing is improving faster than the state of Georgia,” he explained. “That said, it also suggests Georgia should gradually return to a similar growth path.”

This observation is drawn from a survey question that asked respondents about their anticipated production for the next three to six months. The percent of manufacturers expecting an increase has dropped for the last four months, he added.

Other highlights from the September PMI:

·         New orders down 9.0 points to 43.5, 9.6 points below its six-month average

·         Production up 2.8 points 47.8, 3.0 points below its six-month average

·         Employment up 13.7 points to 58.7, 6.4 points above its six-month average

·         Supplier delivery up 4.7 points to 52.2, 1.0 points above its six-month average

·         Finished inventory down 9.0 points to 43.5, 5.8 points below its six-month average

·         Commodity prices up 0.5 of a point to 63.0, 11.2 points above its six-month average

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 Georgia PMI provides data used by institutions such as the Federal Reserve Bank of Atlanta to assist in its analysis of current economic conditions, along with many other data sources, to get a picture of economic activity. 

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