Georgia manufacturing index outpaces national index for March

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Surprise jump in new orders and improved employment suggest a strong upward trend

KENNESAW, Ga.  (April 1, 2013) — Georgia manufacturing activity sharply increased for March breaking from what has been a gradual improvement since January.  Additionally, Georgia outpaced both the national and Southeast indexes due primarily to significant improvement in new orders, employment and finished inventory, 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 Georgia PMI index reading of 61.8 registered its first reading above 60 since May 2012, when the PMI reached 61.9. The March National PMI is 51.3, which is down 2.9 points from the previous month.

“It’s unusual for both the Georgia and National PMIs to be separated by 10 points or more,” said Don Sabbarese, director of the Econometric Center and professor of economics at Kennesaw State. “When this does occur, the two measures eventually return to a more normal historical difference.”

This is the third consecutive month that the Georgia PMI has shown improvement. March’s reading of 61.8 is 9.3 points above the PMI’s six-month average of 52.6.

“March’s strong jump in new orders and employment were a surprise,” added Sabbarese. “These numbers confirm a stronger up-trend, but higher than anticipated. It’s not clear that these numbers are sustainable, but for now they are impressive.”

Sabbarese also noted that strength from the housing and motor vehicle sectors have offset expected weakness from higher taxes, sequestration and the European economy.

“The 2013 first quarter’s PMI results are building a stronger case that Georgia respondents are benefiting from improved market conditions, even as the cross currents of weaker fiscal policy could suggest otherwise,” he said.

Highlights from the March PMI include:

·         New orders up 15.7 points, to 70.5

·         Production down 0.4 of a point, to 59.1

·         Employment up 9.1 points, to 59.1

·         Supplier delivery up 2.2 points, to 54.5

·         Finished inventory up 6.4 points, to 65.9

·         Commodity prices down 14.7 points, to 59.1

 

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 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 March 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 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.