August 2015 Manufacturing Purchasing Managers Index

August 3, 2015: Georgia’s Purchasing Managers Index (PMI) — a reading of economic activity in the state’s manufacturing sector — decreased 7.1 points during July. Two key areas to note are New Orders and Supplier Delivery Time; both down more than ten percent in the last month. 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 June respondents:

• “Outlook is decent. There is planning for capital equipment purchases next year.”
• “We are cautiously optimistic regarding increased revenues and slightly lower raw materials costs.”
• “Even though we are slowing in Q3, it is a normal seasonal thing.”

Other highlights of the July PMI include:

• New orders were down 17.1 points, to 55.8
• Production was down 9.5 points, to 63.5
• Employment was up 3.4 points, to 59.6
• Supplier delivery time was down 10.3 points, to 48.1
• Finished inventory was down 1.6 points, to 44.2
• Commodity prices were down 4.5 points, to 53.8

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 0.8 points in July, to 52.7. 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 the PDF link at the top of this article. Contact any member of the manufacturing industry accounting group or the distribution industry accounting group of Smith and Howard at 404-874-6244.