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Southeastern Manufacturing Survey

Embargoed until 10 a.m. December 12, 1995

SOUTHEASTERN MANUFACTURERS IN NOVEMBER:
PRODUCTION, OUTLOOK SLIP; PRICES WEAKEN

According to the monthly survey conducted by the Federal Reserve Bank of Atlanta, the share of Southeastern manufacturers reporting gains in production declined in November after a modest rise in October. New orders weakened again continuing a pattern begun four months ago. Finished goods inventories have softened. Current price indexes were at or near record lows. Looking ahead, the proportion of manufacturers anticipating higher output in six months continued a four month downtrend.

In November, the proportion of survey respondents reporting increased production fell to 32 percent from October's 37 percent. The diffusion index for production slipped to 5.5 in November from 9.4 in October, while the diffusion index for new orders dropped to minus 4.6 in November from plus 0.5 in October. November's index figure for new orders was the second lowest in the series four years, the low of minus 10.3 having been set this past April. The finished goods inventory index turned negative for the first time in five months as 27 percent of respondents reported declines, while only 20 percent reported higher inventories. Both the employment and workweek indexes improved moderately, but the employment index remained negative.

The proportion of manufacturers receiving higher prices for finished products was little changed at 13 percent in November compared with 12 percent in October. However the share reporting decreases jumped to 18 percent from 12 percent the month before. The prices received index, in negative territory in two of the last three months, is at its lowest since August 1993. The diffusion index for prices paid fell to 5 in November from 13 in October and is a series low.

Expectations for future manufacturing activity generally continued to weaken. Forty-two percent of respondents expect higher output in six months, compared with 45 percent in October. This series has been declining since a recent high of 59 percent in July. The series low of 34 percent was set in March of this year. Expectations for new orders, shipments, and backlogs declined similarly as did employment and the average workweek. Outlook price indexes also weakened for prices received and prices paid, with both at or near series lows in November.

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 the article by R. Mark Rogers "Tracking Manufacturing: The Survey of Southeastern Manufacturing Conditions," in the September/October 1992 issue of the Federal Reserve Bank of Atlanta's Economic Review.

Summary of Southeastern Manufacturing Conditions: November 1995