Georgia manufacturing activity slips in May but stays ahead of national index

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Decreases in finished inventory and production account for drop in state’s manufacturing index

KENNESAW, Ga.  (June 3, 2013) — Georgia manufacturing activity continues to grow, but at a somewhat slower pace than the first three months of 2013, according to the Purchasing Managers Index (PMI) released today by Kennesaw State University’s Econometric Center in the Michael J. Coles College of Business.  Despite some sharp adjustments for May, the Georgia PMI is still ahead of the national index.  

Georgia’s May PMI of 53.8 is less than a point lower than its six-month average of 54.4, which is in line with its longer term trend, said Don Sabbarese, director of the Econometric Center and professor of economics at Kennesaw State.  The national index fell 1.7 points to 49 in May.

Georgia’s finished inventory reading of 50 is 6.2 points lower than its six-month average of 56.2.

“The decrease in finished inventory appears to be consistent with an inventory cycle in which inventories were down sharply at the end of 2012, followed by an increase for first quarter 2013,” Sabbarese said. “That adjustment is now completed as a reassessment of a current manufacturing slowdown, leading to the lower inventories.” 

Despite a strong decrease in finished inventory and a slight decrease in production, Georgia’s May commodity price increased 5.9 points to 47.9 for the first time in three months.

“There are economic cross-currents creating uncertainty from weaker fiscal spending policies and  weaker exports that are flowing against a stronger housing market, leaving many manufacturers unsure of future overall economic and individual market growth,” Sabbarese said.

Other highlights from the May PMI:

·         New orders up 0.3 points to 58.3, 1.8 points above its six-month average

·         Production down 1.8 points to 54.2, 0.7 of a point above its six-month average

·         Employment up 0.2 points to 54.2, 1.0 point above its six-month average

·         Supplier delivery up 4.1 points to 52.1, matching its six-month average

·         Finished inventory down 8.0 points to 50, 6.2 points below its six-month average

·         Commodity prices up 5.9 points to 47.9, 9.5 points below 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. 

For a full report of the May PMI, or to speak with Sabbarese, please call 770-262-5786. 

 

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Kennesaw State University is the third-largest university in Georgia, offering 80 graduate and undergraduate degrees, including doctorates in education, business and nursing, and a new Ph.D. in international conflict management. A member of the University System of Georgia, Kennesaw State is a comprehensive, residential institution with a growing population of 24,600 students from more than 130 countries.