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Georgia’s March Manufacturing Activity

by: Smith and Howard

April 1, 2016

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According to Don Sabbarese, Professor of Economics at Kennesaw State University, “Both the Georgia and National PMIs increased. The National PMI moved above 50 for the first time since October 2015. Georgia’s PMI will continue to demonstrate growth for its manufacturing sector. However, its current high levels may not be sustainable.”

Georgia’s Purchasing Managers Index (PMI) — a reading of economic activity in the state’s manufacturing sector — increased 5.1 points during March. The most-improved area was Supply Deliveries; up 12.2 points in March. 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 March respondents:

  • “Our backlog is at historical high. our delivery is out so far we are losing some business. demand remains very strong for our products. How long it will last?”
  • “I think we are heading into recession and the lifting construction, mining industries are in the downward spiral or cyclical trends.”
  • “Oil and mining commodities need to rise for us to see an increase in business.”

Other highlights of the March PMI include:

  • New orders were up 5.4 points, to 73.8
  • Production was down 0.1 points, to 76.2
  • Employment was up 6.9 points, to 59.5
  • Supplier delivery time was up 12.2 points, to 59.5
  • Finished inventory was up 1.1 points, to 64.3
  • Commodity prices were up 11 points, to 45.2

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 2.3 points in March, to 51.8. 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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