June 2014 PMI Report Increases

July 1, 2014: Georgia’s Purchasing Managers Index (PMI) — a reading of economic activity in the state’s manufacturing sector — increased 0.5 of a point during June. 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.

Some general remarks from the June respondents:

“Steel lead times are increasing in USA and base pricing forecast to increase. This will only make USA steel products less favorable than Asian materials.”
“As economy strengthens, most companies still hesitant to hire additional customer service reps, inside sales, etc.”
“The second half looks weaker than originally expected as housing and remodeling struggle. Also our multiple price increases of prefinished solid hardwood flooring products is causing demand to weaken.”

Other highlights of the June PMI include:  

• New orders were down 2.8 points, to 65.4 
• Production was down 2.4 points, to 63.5
• Employment was down 3.0 points, to 53.8
• Supplier delivery time was up 5.1 points, to 59.6
• Finished inventory was up 5.6 points, to 44.2
• Commodity prices were down 16.3 points, to 51.9

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 0.1 of a point in June, to 55.3. 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.