Georgia’s manufacturers expect more growth in the months ahead despite a mixed bag of results for key economic indicators in December, according to a new report from Kennesaw State University’s Econometric Center.
The center’s monthly survey of purchasing managers responsible for acquiring the materials companies use to make products found optimism that they would continue to benefit from a strengthening economy in the first quarter.
KSU’s Purchasing Managers Index (PMI) rose 1.6 points to 53.9 in December. A reading above 50 indicates expansion in textiles, transportation equipment, food and beverages, and computer, electrical equipment and appliance manufacturing.
December marked the third straight month the state’s PMI was above 50 since earlier in the 2013.
Don Sabbarese, director of the Econometric Center, said the housing and auto industries will continue to be important contributors to manufacturers’ ability to expand in the months ahead.
“If those two industries continue to increase the way they had in 2013, I think that’s a good foundation for continued growth, especially in manufacturing,” Sabbarese said.
Manufactures, however, will also face “a lot of wild cards” that determine the spending habits of consumers and businesses that order from factories. Sabbarese suggested higher mortgage rates could affect demand in the housing industry, which is already seeing an increase in home prices, and the impact of higher health care costs is still unfolding.
Georgia had an estimated 356,300 factory workers in November, according to the state Department of Labor, up from a revised 355,500 a month earlier.
The Kennesaw report showed that manufacturers received fewer orders in December and production was down. Thirty-nine percent of purchasing managers, however, expect to increase production in the next three to six months, plans that bode well for increased hiring.
A recent Federal Reserve report showed 38 percent of factories expected to hire more workers in the first quarter compared with 31 percent in the fourth quarter.
The Kennesaw report also showed other signs that purchasing managers were optimistic:
- They reported lower inventories of finished products, an indication that their shelves would have to be replenished.
- Suppliers of raw materials were having a harder time making deliveries, an indication that there was more demand for the materials.
- The cost of commodities, the raw materials used in manufacturing such as copper and steel, was also higher, another indication of demand from factories.
Georgia purchasing managers were more optimistic than others across the Southeast who reported lower manufacturing activity last month. The state, however, lagged the nation, which averaged a PMI score of 57, compared with 53.9 in Georgia.
Of the 18 manufacturing industries surveyed nationally, 13 reported growth in December, which is down from 15 in November.
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