Georgia PMI betters in February

Atlanta Business Chronicle

The Peach State’s manufacturing activity continued slight improvement in February but remains anemic, according to the Econometric Center at Kennesaw State University’s Michael J. Coles College of Business.

Georgia’s Purchasing Managers Index (PMI) -- a reading of economic activity in the state’s manufacturing sector -- rose five points from January to 40.4 in February. The February number shows continued weakness, but was supported by healthy increases in new orders, production and finished inventory. It follows a months-long decline that hit bottom last December.

The Georgia PMI reading is a composite of five variables -- new orders, production, employment, supply deliveries and finished inventory. A PMI reading above 50 shows manufacturing activity is expanding. A reading below 50 means the manufacturing industry is contracting.

“The latest numbers reveal that manufacturing may have reached bottom in the fourth quarter of 2008,” said Don Sabbarese, professor of economics and director of the Econometric Center at the Coles College of Business. “While this is certainly good news -- should the recovery continue in the coming months -- the manufacturing sector remains anemic due to growing domestic and global economic weakness.”

Most manufacturers continue to operate in an uncertain environment, which means the short-term improvements do not indicate a shift in their pessimism about current market conditions, Sabbarese said.

“Firms will respond to a jump in new orders by boosting production without hiring more workers or buying new equipment,” he said. “When they are finally convinced that a bump in new orders is permanent, then they will be willing to hire more workers and buy more capital. That point is a long way off.”