Georgia manufacturing index up continues to grow with slight increase for February

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Decreases in new orders, employment and supplier delivery time offset by increases in production and finished inventory offers cautious optimism

KENNESAW, Ga. (Mar. 1, 2013) —  Georgia manufacturing activity was up slightly in February to 55.2, an increase of 0.2 over the January report. However, an unusual mix of higher production and finished inventory, which was offset by lower new orders and employment is not a viable combination for sustainable growth, according to the Purchasing Managers Index (PMI) released today by Kennesaw State University’s Econometric Center at the Michael J. Coles College of Business.

This month’s PMI index registered its second consecutive reading above 50, a level consistent with a growing manufacturing sector.

 “February’s report offers some optimism that the manufacturing sector, so far, has weathered the adverse 2013 effects of higher taxes, gas prices, and the implementation of sequestration. The latter obviously has not gone into effect and will take time to filter through the economy,” said Don Sabbarese, director of the Center and professor of economics. “The next three months will offer a clearer picture of how these conditions will affect manufacturing.”

The February PMI index also recorded a 4.3 higher reading over its six-month average of 50.9 points.

“The first two months of 2013’s PMI results suggest Georgia respondents are experiencing improving market conditions relative to 2012, but there are quite a few changing economic conditions, that could have a less than favorable effect on some sectors especially tied to the defense sector,” said Sabbarese.

Highlights from the February PMI include:

·       New orders down 4.9 points, to 54.8

·       Production up 3.8 points, to 59.5

·       Employment down 1.9 points, to 50

·       Supplier delivery down 3.4 points, to 52.4

·       Finished inventory up 7.6 points, to 59.5

·       Commodity prices were up 8.4 points, to 73.8

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

 

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