Georgia’s August 2016 Manufacturing Activity

by: Smith and Howard

September 1, 2016

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According to Don Sabbarese, Professor of Economics at Kennesaw State University, “The August report show that the rise in Georgia new orders and production rise to offset decreases in employment, supplier delivery time, and finished inventory.” At Smith and Howard, we continue to see the challenge of finding skilled workers remains at the forefront of an otherwise optimistic view from respondents. 

Georgia’s Purchasing Managers Index (PMI) — a reading of economic activity in the state’s manufacturing sector — decreased 0.1 points during August to 52.4. The national PMI was down 3.2 points in August, to 49.4. A PMI reading above 50 indicates that manufacturing activity is expanding; a reading below 50 indicates it is contracting. Although the overall Georgia PMI remained consistent with July’s report, commodity prices were down 21.9 points in August. 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 August respondents:

  • “Business is terrific and lack of workers is only thing slowing us down.” (To learn how millennials are effecting the manufacturing industry, click here.)
  • “Economy seems stable.”
  • “Backlog of orders remains very high. Very difficult to recruit skilled workers for our industry. Business is good. Delivery is bad for new orders.”

Other highlights of the August PMI include:

  • New orders were up 9.0 points, to 55.9
  • Production was up 8.6 points, to 61.8
  • Employment was down 12.7 points, to 52.9
  • Supplier delivery time was down 0.2 points, to 52.9
  • Finished inventory was down 5.5 points, to 38.2
  • Commodity prices were up 21.9 points, to 50.0

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 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.

Read the entire report by clicking here. Contact any member of the manufacturing industry group or the distribution industry group of Smith and Howard at 404-874-6244 or simply fill out the form below.

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