Georgia manufacturing index down in November, down for 2011

News at KSU

Manufacturing activity in Georgia was down in December, ending 2011 more than 6 points down for the year, according to the Econometric Center at Kennesaw State University's Coles College of Business.

Georgia's Purchasing Managers Index (PMI) — a reading of economic activity in the state's manufacturing sector — dropped 5 points in December, to 47.4 –– a reading below 50 indicates a contraction –– after a rebound of 9.2 points in November. The PMI dropped 6.4 points from 53.8 in January 2011.

New orders and production declined, with six-month averages of 50.6 and 50.9, respectively.

"As we start the new year, there is no clear trend for 2012," said Don Sabbarese, professor of economics and director of the Econometric Center at the Coles College of Business. "2011 was a year of two separate trends: We saw growth in new orders and production during the first six months, but they were down significantly in the second half. Manufacturers are still trying to sort out what this means for 2012."

Other highlights of the December PMI include:

• New orders decreased 8.1 points, to 50.0
• Production decreased 7.8 points, to 46.3
• Employment remained flat at 50
• Supplier delivery time decreased 1.9 points, to 48.1
• Finished inventory decreased 7.4 points, to 42.6
• Commodity prices were up 4.1 points, to 50.0

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