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Southeastern Manufacturing Survey

For Immediate Release Aug. 12, 1997

SOUTHEASTERN MANUFACTURING SURVEY IN JULY:
CURRENT ACTIVITY GENERALLY STRONGER; OUTLOOK HEALTHY

Reports on manufacturing activity in the Southeast reflect a general increase in current activity in July compared to June. Although the production index edged down, indexes for shipments, new orders, backlogs, employment and the employee workweek rose significantly. More importantly reports of "no change" remain the dominant response in most of the categories, especially the price series. Because July data have been difficult to seasonally adjust as a result of factory vacation closings, inferences regarding the meaningful magnitude of July movements in activity should be made cautiously and corroborated with August data. The increase in current activity was accompanied by outlook indexes that rose or showed only minor slippage. Current price conditions were mixed as the prices received index rose sharply, while the prices paid index edged down. Current firming for prices received may be temporary as the prices received outlook index declined, while the prices paid outlook index held steady at modest levels.

According to the monthly survey conducted by the Federal Reserve Bank of Atlanta in July, the production diffusion index slipped to 13 in July from 15 in June. The proportion of survey respondents reporting increased production was unchanged at 36 percent, while those reporting declining production increased to 23 percent from 21 percent in June.

Other indicators of current activity moved up significantly. Part of the move to higher index levels, however, may simply reflect seasonal adjustment difficulties. The new orders index jumped to 20 in July from 11 in June, while the backlogs index advanced to 12 from minus 2 the month before. The backlogs index was at its highest level since September 1994. The number of employees and the employee workweek indexes also rose noticeably, with the employee index at its highest level since a year ago.

The industry business activity index jumped to 23 from 15 in June. July’s figure was the highest since October 1994. However, the outlook index for industry business activity slipped to 40 in July from a recent high of 45 the month before.

Current price indexes gave mixed signals. Prices received rose to 11 from 0 in June. However, the share reporting no change rebounded to 76 percent in July from 72 percent in June. Recent firming has been led by the food industry. Since March of this year, the prices received index has been on an upward trend in contrast to consecutive negative months running from November 1995 through January 1997. The current raw material prices index edged down to 5 from 8 in June as the share reporting no change rose to 71 percent from 67 percent in June.

Outlook indexes in July generally were at healthy levels. The production outlook index rose to 42 from 40 in June. Expected production over the last four months has remained at levels not seen for an extended period since mid-1995. The new orders outlook index also has remained firm over the last few months. However, the expected shipments series rebounded moderately and in turn expected backlogs slipped. The outlook index for employees rose, but 62 percent expect no change in their work force size in coming months.

In summary, manufacturing in the Southeast continues to have healthy forward momentum as current activity is moderately strong, new orders have improved and outlook indexes remain on a recent plateau. Current price indexes have shown only occasional firming in price pressures and remain well below series highs, indicating mostly subdued prices.

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: July 1997 data