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Southeastern Manufacturing Survey

For Immediate Release April 14, 1998

SOUTHEASTERN MANUFACTURING SURVEY IN MARCH:
CURRENT ACTIVITY MIXED; OUTLOOK HEALTHY; PRICES VOLATILE

According to the monthly survey of southeastern manufacturers conducted by the Federal Reserve Bank of Atlanta, current activity indicators in March were mixed, similar to their pattern during most of last year, but generally remained at moderate levels. The index for output declined after a strong increase in February, while the indexes for new orders and backlogs were each up for the third consecutive month. Inventory indexes moved in opposite directions. The employee index edged down, while the average workweek index rose noticeably. Both current price indexes rose noticeably from recent lows, though the supplier delivery time index edged down. Outlook activity indicators were little changed in March, continuing at some of the highest levels in several years. Outlook price indexes moved within recent ranges.

The production index in March declined to 13.9 from a revised 23.0 in February, returning to a level seen in much of 1997. The proportion of respondents reporting higher production in March slipped to 34.7 percent from 42.3 percent in the prior month, while the share reporting lower output edged up to 20.9 percent from 19.3 percent the month before.

March manufacturing activity appears to be healthy despite slippage in the output index. The new orders index jumped from 12.9 in February to 22.0 in March — the highest level since April 1997. For the first time in five months, more respondents reported an increase in backlogs than reported a decline. As another sign of strength, the number of employees index, at 11.6 in March, remained near the series high of 13.3 set the prior month.

Inventory indexes remain weak compared with late 1997, although outlook indexes suggest that this softness will not continue. The finished goods inventories index edged up to minus 9.5 from minus 11.2 in February, while the materials inventories index slipped to minus 4.6 from minus 1.6 the month before. Negative values are not unusual for the finished goods index but are among the lowest recorded for the materials index.

The current prices received index rose to 7.1 from 0.0 in February. This index had been weak in recent months — recently reaching as low as minus 6.9 in December 1997. The current prices paid index rose sharply to plus 3.1 in March from minus 8.2 in February. The supplier delivery time index edged down to 7.5 in March from 8.7 the prior month — indicating that materials and products from vendors were marginally more readily available.

The production outlook index was virtually unchanged at 41.5 in March, compared with 40.9 the prior month. Outlook index levels for production have been high in recent months, with the January through March period having the highest three-month average since early 1993. The outlook index for new orders also has been steady and at moderately high levels, ranging between 30 and 40 since June 1997. Weakness in current inventory levels may be short-lived, as outlook indexes for inventories have risen over the last few months. The outlook index for materials inventories jumped from 0.9 in February to 6.4 in March — a series high. This index had been negative for 19 consecutive months, ending in January 1998. Outlook price indexes moved in divergent directions — the index for prices received edged down, while the index for prices paid rose. Both indexes remained within moderate ranges seen since early 1997.


Summary of Southeastern Manufacturing Conditions 
Diffusion Indexes 
Seasonally Adjusted 

 Current Month Versus Prior Month

1998

March February (R) January

Production 13.9 23.0 3.9
Shipments 18.6 18.0 3.4
New orders 22.0 12.9 7.5
Backlog of orders 2.2 -0.2 -2.6
Materials inventories -4.6 -1.6 -5.0
Inventories of finished goods -9.5 -11.2 2.8
Number of employees 11.6 13.3 11.5
Average workweek 7.2 3.4 0.5
Prices received 7.1 0.0 -1.8
Prices paid 3.1 -8.2 8.0
New export orders 6.4 8.1 0.0
Supplier delivery time 7.5 8.7 5.7
Industry business conditions 26.1 15.2 8.8

Six Months From Now Versus Current Month

March February (R) January

Production 41.5 40.9 44.3
Shipments 38.6 35.5 40.0
New orders 33.4 34.2 31.7
Backlog of orders 10.1 8.2 8.2
Materials inventories 6.4 0.9 -0.7
Inventories of finished goods 6.0 2.9 -4.5
Number of employees 14.7 12.2 11.2
Average workweek 7.2 4.5 3.4
Prices received 17.6 20.1 13.0
Prices paid 27.2 21.6 24.0
Capital expenditures 31.3 22.7 23.1
New export orders 9.8 19.6 19.8
Supplier delivery time 0.0 4.9 -1.0
Industry business conditions 32.3 32.3 20.3

R=Revised

 NOTE: The Atlanta Fed's survey covers the Sixth Federal Reserve District, which includes Alabama, Florida and Georgia and portions of Louisiana, Mississippi and Tennessee. The plants surveyed represent a cross section of industries in the region. For background on the Survey of Southeastern Manufacturing Conditions, see "Tracking Manufacturing: The Survey of Southeastern Manufacturing Conditions." Click here for historical data.

Summary of Southeastern Manufacturing Conditions: March 1998 data