Georgia manufacturing falls to six month low in August

 Donald Sabbarese
Don Sabbarese

KENNESAW, Ga. (Sep 6, 2015) — Georgia manufacturing dropped 8.3 points to land at 45.9 in August, according to the Purchasing Managers Index released on Sept. 1 by Kennesaw State University’s Econometric Center in the Michael J. Coles College of Business.

The latest numbers indicate that manufacturing in Georgia is no longer expanding, and in fact contracted in August. New orders and production remained weak for the second consecutive month, each falling below 50. New orders were driven down as the percent of respondents reporting higher new orders slipped from 50 percent in June, to 39 percent in July, to 22 percent in August.

Employment also fell as a response to two consecutive months of weak production. Since June, the percent of respondents reporting higher production levels fell from 50 to 19 percent. This drop off is consistent with a drop in respondents reporting expected higher production in the next three to six months from 42 percent in July to 37 percent in August.

“Manufacturing has been weaker and more volatile in the last four months,” said Don Sabbarese, director emeritus of the Econometric Center and professor of economics at KSU. “This is consistent with the mixture of positive and negative data on a broader economic level. This volatility creates uncertainty and has made it more difficult to identify a clear trend going forward.”

While employment had remained relatively stable in June and July, the number of respondents reporting lower employment jumped from 8 percent to 26 percent. Although employment tends to be less volatile from month to month, this raises some additional concern, according to Sabbarese.

“Automobile manufacturing continues to be the strongest yet most volatile sector contributing to this uncertainty,” Sabbarese said.

The National PMI also fell 1.6 points to 51.1 in August. Weakness in new orders and production also accounted for the major source of its weakness.

Highlights from the August PMI were:

  • New orders are down 11.3 points to 44.4, which is 13.2 points below its six-month average.
  • Production is down 20.9 points to 42.6, which is 19.3 points below its six-month average.
  • Employment is down 11.5 points to 48.1 points, which is 8.7 points below its six-month average.
  • Supplier delivery is up 3.8 points to 51.9, which is 3.2 point below its six-month average.
  • Finished inventory is down 1.6 points to 42.6 points, which is 6.2 points below its six-month average.
  • Commodity prices are down 20.5 points to 33.3, which is 13.9 points below its six-month average.

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 Marietta Daily Journal