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Southeastern Manufacturing Survey

Embargoed until 10 a.m. December 12, 1996

SOUTHEASTERN MANUFACTURING IN NOVEMBER:
CURRENT ACTIVITY MIXED; OUTLOOK STEADY, POSITIVE

According to the monthly survey conducted by the Federal Reserve Bank of Atlanta, the proportion of southeastern manufacturers reporting gains in production increased somewhat in November after a sharp decline in October. Diffusion indexes for production, new orders and backlogs also were up after sharp drops in October. However, the index for shipments edged down marginally. The average workweek index fell for the second consecutive month, while the employment index was essentially steady. Current price indexes were mixed. Most outlook indicators were steady and at moderate levels. Outlook price indexes rose, coming off recent series lows.

In November the proportion of survey respondents reporting increased production rose to 31 percent from 26 percent the month before. The share of respondents reporting a decline in production increased slightly to 24 percent from 22 percent in October. As a result, the diffusion index for production improved to 7 in November from 3 in October. The index for new orders improved significantly, swinging from a minus 7 to plus 5 in November. Consequently, with shipments soft, the backlogs index became less negative -- rising from minus 11 to minus 5.

The number of employees index was little-changed at minus 1 compared with zero in October. This index has remained near the zero mark over the last four months. However, the average workweek index fell from minus 3 in October to minus 8 in November -- the second consecutive negative reading after six months in the positive range. Current price indexes were mixed in November but remain low. Somewhat fewer respondents reported declines in prices received as this price index rose from minus 12 in October to minus 7 in November. The prices paid diffusion index was little-changed at 2 compared with 3 in October.

Respondents remained moderately optimistic about an expected rebound in activity. The production outlook index was up slightly at 36 in November compared with 34 the month before. Expected new orders slipped but remained above recent lows. The anticipated backlogs index was unchanged and in the positive range for the second consecutive month. The expected employment index, however, jumped to 12 in November from minus 2 in October. November's figure is the first positive in five months and the highest level since August 1993. The average workweek outlook index also returned to positive territory but remained moderate. Price outlook indexes rose noticeably in November. The expected materials prices index jumped to 30 from 23 in October, as the share expecting higher materials prices in coming months rose to 44 percent from 37 percent in October. This index is coming off a series low of 12 set in July of this year. The index for expected finished goods prices rebounded to 7 in November from zero the month before. October's figure, however, was a series low.

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.

**For reprints and historical data, see http://www.frbatlanta.org on the World-Wide Web or visit the U.S. Commerce Department's Economic Bulletin Board.

Summary of Southeastern Manufacturing Conditions: November 1996