Georgia’s Purchasing Managers Index (PMI) - a reading of economic activity in the state’s manufacturing sector - for April was 57.0, up 5.1 points from 51.9 in March. The April numbers reflect higher commodity prices, an increase in finished inventory and an improvement in the employment picture.
The latest Georgia PMI surpassed 50 for the second time since December 2007, with March also showing an increase. However, the national trend remains well below this level. The national PMI for April, released May 1 by the Institute for Supply Management, was 48.6, unchanged from March.
“If this trend continues, it would suggest Georgia’s manufacturing sector is out-performing the national manufacturing sector,” said Don Sabbarese, professor of economics and director of the Econometric Center at the Coles College of Business.
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 the manufacturing industry is contracting.
The PMI, compiled from a monthly survey of manufacturers, is the earliest indicator of market conditions in the sector. Since manufacturing is sensitive to changes in the economy, it can also reveal changing macroeconomic trends, even if manufacturing accounts for only 13 percent of gross domestic product (GDP), said Sabbarese.
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 that the Federal Reserve Bank of Atlanta analyzes, along with many other data sources, to get a picture of economic activity in Georgia.
The PMI reading is a composite of six variables -new orders, production, employment, supply deliveries, finished inventory and commodity prices.
The April PMI showed an improvement of 11.3 points, to 51.7, in the employment picture, which had been deteriorating for months. But it reflected a significant increase in commodity prices, with 80 percent of participants reporting higher commodity prices. There was a significant increase, 9.2 points, in the number of manufacturers that reported higher commodity prices.
“The commodity price level of 90 points is the highest reading dating back to 2000,” Sabbarese said. “Eighty percent of participants reported higher prices. This level of price increases is putting added pressure on producers to pass these higher costs on to their customers.”
The April PMI also showed a significant increase in the number of companies reporting finished inventory, from 55.8 in March to 66.7 in April.
For a full report of the April PMI or to schedule an interview with Professor Don Sabbarese, please contact Aixa M. Pascual at 678-797-2549 or apascual@kennesaw.edu.
Find out more about the Econometric Center at http://econometric-
