Georgia manufacturing index up 4.9 points in January

PMI starts off year with an increase, pushing index above 50 in first month of 2012

News at KSU

Manufacturing activity in Georgia was up 4.9 points in January, with the Georgia PMI edging above 50 as 2012 kicked off, according to the Econometric Center at Kennesaw State University's Coles College of Business.

Georgia's Purchasing Managers Index (PMI) — a reading of economic activity in the state's manufacturing sector — increased 4.9 points in January, to 52.3. A reading above 50 indicates expansion. The PMI has been volatile for the past six months.

Employment was up 3.3 points, to 53.3, while production was down 3 points, to 43.3.

"2012 is off to a good start, but the unexpected drop in production leaves some uncertainty regarding a sustainable growth trend," said Don Sabbarese, professor of economics and director of the Econometric Center at the Coles College of Business. "The PMI hopefully has returned to a growth path for 2012 after months of ups and downs."

Other highlights of the January PMI include:

• New orders remained at 50

• Supplier delivery time was up 13.5 points, to 61.7

• Finished inventory increased 10.7 points, to 53.3

• Commodity prices were up 6.7 points, to 56.7

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. The national PMI was up 1 point, to 54.1, for January. A PMI reading above 50 indicates that manufacturing activity is expanding; a reading below 50 indicates it is contracting.

The Georgia PMI reading is a composite of five variables — new orders, production, employment, supply deliveries and finished inventory. A sixth variable, commodity prices, is compiled by the Coles College's Econometric Center but does not go into the PMI calculation.

The PMI, compiled from a monthly survey of manufacturers, is the earliest indicator of market conditions in the sector. Since manufacturing, which accounts for 11 percent of GDP, is sensitive to changes in the economy, it can also reveal changing macroeconomic trends.

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 used by institutions such as the Federal Reserve Bank of Atlanta to assist in their analysis of current economic conditions, along with many other data sources, to get a picture of economic activity.

For a full report of the January PMI, or to speak with professor Sabbarese, please call 770-423-6094.