Georgia Manufacturing News – October 2015

November 2, 2015: Georgia’s Purchasing Managers Index (PMI) — a reading of economic activity in the state’s manufacturing sector — increased 5.9 points during October. The most-improved areas were Supply Deliveries and Finished Inventory; up 11.3 and 9.9 percent respectively in October. The Purchasing Managers Index (PMI) Report is underwritten by the Manufacturing and Distribution Group of Smith and Howard, a top Atlanta CPA firm with a focus on serving manufacturing businesses, and is produced monthly by the Econometric Center at Kennesaw State University.

Some general remarks from the October respondents:

• “Business conditions remain good. we are up over 40% year to date versus last year. Without long-term planning in DC, the continued business climate will diminish.”
• “We are starting to see many price increases for materials in the 5-7% range.”
• “Foundries suffering due to downturn in agriculture and Gas and Oil exploration.”

Other highlights of the October PMI include:

• New orders were up 3.4 points, to 56.0
• Production was up 5.4 points, to 58.0
• Employment was down 0.6 points, to 52.0
• Supplier delivery time was up 11.3 points, to 56.0
• Finished inventory was up 9.9 points, to 51.0
• Commodity prices were down 1.5 points, to 38.0

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 down 0.1 points in October, to 50.1. 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.

Contact any member of the manufacturing industry accounting group or the distribution industry accounting group of Smith and Howard at 404-874-6244.