February Manufacturing Activity Shows Promise

Georgia’s Purchasing Managers Index (PMI)  —  a reading of economic activity in the state’s manufacturing sector  —  showed an encouraging increase for all components except for finished inventory.

In February, Georgia’s PMI increased 6.7 points while the National PMI increased 1.9 points to 53.2. Georgia’s PMI of 56.7 is 3.5 points higher than the National PMI based on Georgia’s higher readings for new orders, production, employment, and supplier delivery time of 3.8, 6.0, 4.0, and 6.1 points, respectively.

Some general remarks from the February respondents:

  • "Although January was impacted by weather, we expect 2014 to be a year of growth."
  • "My company is NOT seeing disruptions in the supply chain as a result of the cold winter which has caused delays in shipments as reported in USA Today."
  • "We are more optimistic because demand has improved, however there is still a lot of uncertainty about demand longer term."

Don Sabbarese, director of the Econometric Center and professor of economics at Kennesaw State, had this to say about the most recent PMI report:

"Georgia manufacturing activity reversed an anemic performance due to decreases in December and January.  New orders and production led the way with double digit increases. This more than offset double digit loses for the prior two months. The question remains is the weather responsible for this three month swing or is there some other economic factors in play."

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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