Georgia manufacturing index down in December

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December PMI decreased again as the fiscal cliff and other tax changes in 2013 continues to challenge Georgia Manufacturers
 
KENNESAW, Ga.  (Jan. 2, 2013)  —  Georgia Manufacturing fell for the second consecutive  month as manufacturers plan for 2013. Manufacturers are more cautious as Washington struggles with fiscal policy issues and new orders and production remain weak, according to Don Sabbarese, professor of economics and director of the Econometric Center at the Michael J. Coles College of Business.
 
“It looks like Georgia manufacturing is closing out the year on a down note. There is a good chance Georgia manufacturing’s fourth quarter slowdown will carryover to 2013,” noted Sabbarese in the December Purchasing Managers Index (PMI), released today. “The post hurricane disruption in November was part of the problem, but December reveals signs of potentially broader weakness. The unintended consequences of tax changes in 2013 may be complicating future decisions.”
 
According to the report, four indicators — new orders, production, employment and finished inventory — recorded substantial decreases, while supply deliveries was the only bright spot in November.
 
“December’s PMI decrease closed out the fourth quarter and year on a weaker growth path.  Manufacturers are still searching for more sustainable demand for their products. They still face economic conditions with offsetting headwinds and tailwinds. As a result, long-term planning remains all that more difficult,” said Sabbarese. “The lack of fiscal policy clarity further complicates this condition.”
 
Highlights from the December PMI include:
 
·         New orders down 7.5 points, to 38
·         Production down 7.5 points, to 36
·         Employment up 2.3 points, to 50
·         Supplier delivery down 4.5 points, to 50
·         Finished inventory up 11.1 points, to 52
·         Commodity prices were up 3.7 points, to 56
 
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 November PMI, or to speak with professor Sabbarese, please call 770-423-6094. 
 
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