Georgia Manufacturing Picks Up, But Remains Below Growth Levels In August

Donald Sabbarese
Don Sabbarese

KENNESAW, Ga. (Oct 16, 2015) — Georgia manufacturing’s PMI recovered three points from its 8.3 point drop in August, according to the Purchasing Managers Index released on Oct. 1 by Kennesaw State University’s Econometric Center in the Michael J. Coles College of Business.

While September’s PMI is still below a reading of 50, the benchmark for growth, the level of improvement for new orders and production of 8.2 and 10 points is an encouraging sign that manufacturing is moving in the right direction. Thirty-two percent of respondents reported higher new orders, up from 22 percent in August. At the same time there was a sharp drop in respondents reporting lower new orders. Production experienced a similar pattern in September.

“One negative sign is that the number of respondents expecting higher production in the next three to six months is down to 21 percent in September from 37 percent in August,” said Don Sabbarese, director emeritus of the Econometric Center and professor of economics at KSU.

Employment also improved in September with a 4.5-point increase and 26-percent reporting higher employment, up from 22 percent in August. Finished inventory and supplier delivery time’s readings of 44.7 and 42 are the factors keeping the PMI’s reading below 50.

“Although Georgia manufacturing rebounded somewhat in September, it still remains below its growth benchmark of 50,” said Sabbarese. “The latest August report for industrial production reported similar weakness on the national level. Sharp swings in motor vehicle production and weaker exports are contributors to its weaker manufacturing number.”

The National PMI fell 0.9 points to 50.2 in September. Weakness in all its underlying components accounted for its weakness in September.

Summary of highlights from the September PMI:

  • New orders were up 8.2 points to 52.6, which is 2.9 points below its six-month average.
  • Production was up 10 points to 52.6, which is 5.9 points below its six-month average.
  • Employment was up 4.5 points to 52.6 points, which is 3.8 points below its six-month average.
  • Supplier delivery was down 7.1 points to 44.7, which is 9.4 point below its six-month average.
  • Finished inventory was down 0.5 points to 42.1 points, which is 3.7 points below its six-month average.
  • Commodity prices were up 6.1points to 39.5, which is 7.2 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