Georgia manufacturing sees cautious growth for second consecutive month

Don Sabbarese

KENNESAW, Ga. (Dec 1, 2015) — Georgia manufacturing saw a second month of modest growth in November, even as new orders and production dropped, according to the Purchasing Managers Index (PMI) released today by Kennesaw State University’s Econometric Center in the Michael J. Coles College of Business.

November’s PMI of 55 is a .2 improvement from October’s reading, and while the gain is small, it continues to reverse the previous downward trend. New orders and production saw drops of 6 and 5.7 points, to 50 and 52.3, but employment, supplier delivery time and finished inventory each saw an increase. Employment picked up 4.8 points, supplier delivery time 3.1 points and finished inventory 4.8 points.

According to Don Sabbarese, director emeritus of the Econometric Center and professor of economics at Kennesaw State University, Georgia manufacturing’s growth path may not be sustainable due to the volatility of new orders.

“Even with this month’s growth Georgia manufacturing’s PMI has been fairly volatile with two sub 50 readings in August and September before October’s improvement,” said Sabbarese. “The national PMI has continued to struggle the past four months to register 4.7 points below Georgia’s October reading.”

One positive indicator in this month’s report is the number of respondents expecting higher production in the next three to six months. That number increased to 21 percent, and supports improved employment outlooks.

The National PMI reported growth for only five of its 18 industries in November. The National PMI reading of 48.6 fell 6.4 points below Georgia’s PMI of 55. Weakness in new orders and production were major contributors.

Summary of highlights from the November PMI:

  • New orders down 6.0 points to 50, 5.3 points below its six-month average
  • Production down 5.7 points to 52.3, 4.7 points below its six-month average
  • Employment up 4.8 points to 56.8 points, 2.6 points above its six-month average
  • Supplier delivery up 3.1 points to 59.1, 6.1 points above its six-month average
  • Finished inventory up 4.8 points to 56.8 points, 9.6 points above its six-month average
  • Commodity prices down 1.6 points to 36.4, 6.9 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.