In keeping with a general slowdown in Georgia’s manufacturing sector, the state’s foreign-owned businesses also experienced a slight drop in their activity during the second quarter following a first quarter uptick.
Don Sabbarese, director of the Econometric Center at Kennesaw State University, said in an Aug. 15 news release that the downturn was due to decreases in both employment and capital spending.
These factors offset increases in new orders and production, according to the Georgia International Business Index (GIBI), which is compiled by Dr. Sabbarese and published by the Michael J. Coles College of Business at Kennesaw State.
The index reported a 2.3-point drop in the second quarter, which followed a significant first-quarter jump of 8.9 points, the first increase since early 2012.
In the first quarter, the GIBI was 57.8, up from 49 in the fourth quarter 2012, indicating that manufacturing activity by foreign firms was expanding in the state. In the second quarter, however, there was a drop from 57.8 down to 55.5 points.
A GIBI reading above 50 indicates that manufacturing activity is expanding; a reading below 50 indicates it is contracting.
The quarterly Georgia International Business Index provides a snapshot of foreign manufacturing activity in Georgia.
Data on new orders, production, employment and capital spending are collected and tallied into a diffusion index compiled from responses to the question: Did your company experience an increase, decrease or no change during the past quarter?
Capital spending by the foreign firms in the first quarter recorded an increase of more than 31 points, while employment rose nearly 15 points. In the second quarter, however, capital spending was down 18.8 points to 50, while employment also was down 15.6 points to 53.1.
“Higher new orders and production bring into question why employment and capital spending are simultaneously decreasing,” Dr. Sabbarese added. “Employment and capital spending decisions can sometimes be weighted more on longer term expectations rather than current market conditions.”
Georgia’s overall manufacturing figures declined for the fourth consecutive month in July, falling even below the national index.
“Although U.S. manufacturing has been adversely affected in the second quarter of 2013 by slower global growth and sequestration, many expect some improvement from this pattern in the second half of 2013,” Dr. Sabbarese said. “That said, manufacturing in Georgia continues to remain flat as we enter into the first month of the third quarter, and the survey’s respondents are somewhat less optimistic.”
Dr. Sabbarese may be reached by calling (770 423-6094) or sending an email to dsabbare@kennesaw.edu
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