Georgia Manufacturing Stumbles In December

Don Sabbarese
 Don Sabbarese

KENNESAW, Ga. (Jan 4, 2016) — For Georgia manufacturing, a promising trot through autumn led to a stumble as the year ended.

After three months of progress, the factory sector skidded in December, according to a monthly report released today by the Kennesaw State University’s Econometric Center in the Coles College of Business.

The center’s index dipped from 55.0 to 52.5 during the month.

Much of the retreat was caused by declines in employment, inventory and delivery times, according to the center. However, there was in increase in the number of respondents who expect higher production in the next three to six months.

The index uses 50 as the break-even point – Anything higher indicates overall growth, anything lower means the sector is shrinking.

The national manufacturing index, for instance, slipped to 48.2 in December.

So while Georgia is paralleling national trends, the sector is still growing, albeit less rapidly, said Don Sabbarese, director emeritus of the Econometric Center. “Georgia’s underlying components and (index) continue to register well above the national reading.”

That slippage comes against a shaky economic back-drop.

The value of the U.S. dollar has been elevated, something that is good for American consumers buying foreign goods or American travelers abroad. But the strong buck makes U.S. exports more costly, like a tax on goods.

And that added burden is especially unwelcome with much of the global economy struggling – a worry that grew with this week’s financial rumblings from China.

John Silvia, chief economist of Wells Fargo, wrote in an emailed newsletter that the sector nationally is in the midst of a “correction.”

The sector just faces too many headwinds, he wrote. “For 2016 we expect industrial production will grow 1 to 2 percentage points below the pace seen earlier in this expansion and closer to the slower pace of last year—there is no imminent rebound here.”

In an email, Silvia wrote that employment, new orders and production all “show weakness.”

Additionally, the weakness in inventories is a “signal of business uncertainty on the outlook.”

About that outlook: some pessimists warn that manufacturing’s struggles could be a portent of problems to come – a sign of how the long, if modest, expansion would come to an end. The recovery that started in mid-2009 has never been robust, but it has gone on a long time, while adding 12 million jobs to the economy.

Since World War II, manufacturing cutbacks have often signaled an economy headed for trouble. But the sector’s place in the economy has shrunk dramatically.

Six decades ago, about one-third of the U.S. workforce was in manufacturing, now it is closer to 9 percent.

That is still significant, but it is far from dominant: According to the Bureau of Labor Statistics, there are 377,700 manufacturing jobs in Georgia. By comparison, leisure and hospitality accounts for 457,800 jobs.

The national reading was the weakest since June 2009 – the month that the recession officially ended, said Michael Montgomery, U.S. economist for IHS Global Insight.

“The manufacturing sector remains mediocre worldwide,” he said.