Georgia’s May 2016 Manufacturing Recent Activity

by: Smith and Howard

June 1, 2016

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According to Don Sabbarese, Professor of Economics at Kennesaw State University, “The Georgia PMI dropped in May driven by lower new orders and finished inventory. Production and employment remain relatively strong suggesting new orders may rebound in the near future.”

Georgia’s Purchasing Managers Index (PMI) — a reading of economic activity in the state’s manufacturing sector — decreased 10.0 points during May to 49.4, its lowest level of the year. Areas with the largest decrease include new orders and finished inventory both down 18.8 points in May. 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 May respondents:

  • “Too much uncertainty for a healthy business environment.”
  • “Commodity prices have risen over the past couple of months which is good for our business. We don’t see this as sustainable unless demand picks up.”
  • “Economic uncertainty growing. Take cautious position on inventories, expenditures, etc.”

Other highlights of the May PMI include:

  • New orders were down 18.8 points, to 43.8
  • Production was down 3.1 points, to 56.3
  • Employment was down 3.1 points, to 59.4
  • Supplier delivery time was down 6.3 points, to 50.0
  • Finished inventory was down 18.8 points, to 37.5
  • Commodity prices were down 6.3 points, to 59.4

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 0.5 points in May, to 51.3. 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 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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