PMI Report Shows January 2014 Decrease

by: Smith and Howard

February 3, 2014

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The Purchasing Managers Index (PMI) Report is underwritten by the Manufacturing and Distribution Group of Smith and Howard, an Atlanta accounting and advisory firm, and is produced monthly by the Econometric Center at Kennesaw State University.
Georgia’s Purchasing Managers Index (PMI) — a reading of economic activity in the state’s manufacturing sector — fell by 3.9 points from 53.9 to 50.0 in January.  

Some general remarks from the January respondents:

“Cautiously optimistic with risks to the downside.”
“December orders and sales were strong – we may have pulled in from January.”
“Extreme cold temperatures affected overall production.”

Other highlights of the January PMI include:

  • New orders were down 2.0 points, to 45.2 
  • Production was down 12.3 points, to 40.5
  • Employment was down 3.6 points, to 54.8
  • Supplier delivery time was down 8.7 points, to 52.4
  • Finished inventory increased 7.1 points, to 57.1
  • Commodity prices decreased 0.4 of a point, to 52.4

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 0.2 points in January, to 56.4. 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.

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