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Southeastern Manufacturing Survey

For Immediate Release April 13, 1999

SOUTHEASTERN MANUFACTURING SURVEY IN MARCH:
PRODUCTION STRENGTHENS AGAIN; PRICES STILL MODERATE

According to the monthly survey of southeastern manufacturers conducted by the Federal Reserve Bank of Atlanta, manufacturing activity in the region continued to gain momentum from weakness in the fall of 1998, while price changes remained moderate. Current activity indexes for production, shipments and new orders rose, while inventory indexes slipped. Outlook indicators edged down after several months of strength but remained close to levels recorded over the past two years. Current and outlook price indexes were mixed but remained in a moderate range as seen during most of 1998.

The current production index in March rose to 26.3 from 15.4 in February. This was the sixth consecutive monthly increase, bringing this index to its highest level since March 1994. For March, the proportion of respondents reporting higher production jumped to 46.4 percent from 33.7 percent the previous month, while the proportion indicating a decrease nudged up to 20.1 percent from 18.3 percent in February.

Most other activity indexes were positive in March although inventories did decline. The new orders index has been slightly more volatile than the production index but continued an upward trend since the fall of 1998. The shipments index jumped sharply in March, even after three strong months. March's shipments index was at the highest level since December 1994. The materials inventories index fell slightly, as did the finished goods inventory index. Additionally, the backlog index remained high despite incremental slippage. The number of employees index edged down after a strong increase in February, but the workweek index moved up.

The prices received index declined to minus 4.8 after firming slightly to 1.1 in February. This index had been notably weak in the latter part of 1998. The prices paid index, however, rose moderately after a sharp dip in February. This index has steadied after very weak numbers in late 1998 but remains soft compared with the series' history.

Outlook indexes generally edged down in March but remained at moderate levels. The lack of a significant drop in outlook indexes as current indexes have risen suggests that manufacturers do not view current strength as an aberration. The outlook index for production declined to 32.8 in March from 38.3 in February. Levels had been high since December 1998. The outlook indexes for both new orders and shipments followed a similar pattern. The expectations index for backlogs, after a jump in February, dropped noticeably to its lowest level since September 1996. Expected new orders for export posted a moderate decline in March — the third monthly decrease in a row. After a large increase in February, the outlook index for capital expenditures fell in March. This index has been volatile in recent months despite being one of the more stable outlook series in the past. The outlook index for prices received has edged up steadily over the past three months but remains moderate. The outlook index for prices paid was down sharply after a jump in February.


Summary of Southeastern Manufacturing Conditions
Diffusion Indexes
Seasonally Adjusted

Current Month Versus Prior Month

 
1999

March February (R) January

Production 26.3 15.4 14.2
Shipments 26.0 14.1 16.4
New orders 16.9 12.9 15.7
Backlog of orders 8.4 10.3 0.5
Materials inventories -1.3 1.7 4.4
Inventories of finished goods -9.5 -6.6 7.2
Number of employees 7.6 11.1 2.2
Average workweek 8.2 2.4 -3.7
Prices received -4.8 1.1 -2.4
Prices paid 0.0 -6.6 3.8
New export orders 4.8 0.0 0.0
Supplier delivery time 1.2 -1.2 1.3
Industry business conditions 14.3 13.7 10.3

Six Months From Now Versus Current Month

March February (R) January

Production 32.8 38.3 37.4
Shipments 33.6 38.3 37.3
New orders 29.5 35.4 29.2
Backlog of orders -1.0 13.5 7.5
Materials inventories 2.2 2.1 1.1
Inventories of finished goods -2.8 -1.5 -6.0
Number of employees 11.6 -1.5 12.2
Average workweek 2.3 -1.2 1.7
Prices received 16.4 15.9 10.0
Prices paid 12.4 26.2 15.8
Capital expenditures 13.2 24.6 3.1
New export orders 9.0 12.3 19.4
Supplier delivery time 0.0 0.0 -4.1
Industry business conditions 23.9 23.0 30.0

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.

Chart 1
Chart 2

Summary of Southeastern Manufacturing Conditions: March data