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Georgia’s December Manufacturing Activity

by: Smith and Howard

January 4, 2016

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According to Don Sabbarese, Professor of Economics at Kennesaw State University,” The good news is the Georgia PMI remains above 50, the benchmark for growth, and 4.3 points above the National PMI of 48.2. The discouraging news is the December Georgia PMI of 52.5 fell 2.5 points and remains at an anemic level of growth.”

December 2015 – Georgia’s Purchasing Managers Index (PMI) — a reading of economic activity in the state’s manufacturing sector — decreased 2.5 points during December. The most-improved areas were New Orders and Production; up 2.5 and 0.2 percent respectively in December. The Purchasing Managers Index (PMI) Report is underwritten by the Manufacturing and Distribution Group of Smith & 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 December respondents:

  • “We have a large backlog and strong quote activity.”
  • “Customers are still very strong even with the holidays.”
  • “Everyone seems to be in holding pattern for 2016; both customers and suppliers.”

Other highlights of the December PMI include:

  • New orders were up 2.5 points, to 552.5
  • Production was up 0.2 points, to 52.5
  • Employment was down 1.8 points, to 55.0
  • Supplier delivery time was down 6.6 points, to 52.5
  • Finished inventory was down 6.8 points, to 50.0
  • Commodity prices were down 3.9 points, to 32.5

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 0.4 points in December, to 48.2. 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.

Read the entire report by clicking here. Contact any member of the manufacturing industry accounting group or the distribution industry accounting group of Smith & Howard at 404-874-6244.

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