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Southeastern Manufacturing Survey

Embargoed until 10 a.m. February 13, 1996

SOUTHEASTERN MANUFACTURERS IN JANUARY:
CURRENT ACTIVITY REBOUNDS MODERATELY; OUTLOOK SLIPS

According to the monthly survey conducted by the Federal Reserve Bank of Atlanta, the share of southeastern manufacturers reporting gains in production rose in January after approaching a series low in December. Other measures of current activity--including shipments, new orders, backlogs, and number of employees--also showed modest improvement. Gains in diffusion indexes came largely as a result of fewer reports of declining activity. Despite modest improvement in current indicators, activity indexes remain low relative to the stronger months of 1994. Outlook indicators generally continued to slip. Current price indexes were mixed, but on balance remained low, while outlook price indexes declined to new series lows.

In January, the proportion of survey respondents reporting increased production edged up to 28 percent from December's 26 percent. The diffusion index for production rebounded to plus 3.6 in January from minus 7.0 in December as the share reporting lower output fell to 25 percent from 33 percent the month before. New orders remained relatively low as the diffusion index stood at minus 7.0 in January, compared with minus 12.6 in December. Diffusion indexes for backlogs, number of employees, and average workweek improved but also remained in negative territory.

Reports on the direction of current prices were mixed, with the share of respondents indicating increased prices remaining small. The proportion of manufacturers receiving higher prices for finished products rebounded to 15 percent in January from 9 percent in December. The share reporting paying higher prices for raw materials was essentially unchanged at 22 percent. However, the percentage reporting declines rose to 15 percent from 10 percent over the same time period.

Expectations for future manufacturing activity generally declined in January. Forty percent of respondents expect higher output in six months, compared with 50 percent in December. The output diffusion index in January stood at 17.3, compared with 31.1 in December, and the historical low of 16.7 set in March 1995. Expectations for shipments, new orders, backlogs, employment, and average workweek also fell. The expectations indexes for prices received for finished products and for prices paid for raw materials both fell in February to new series lows.

Today's report includes revised data based on new seasonal factors over the 1992 through 1995 period. These historical revisions were released Friday, February 9, 1996, and are available on the Atlanta Fed's World Wide Web site http://www.frbatlanta.org and on the U.S. Commerce Department's Economic Bulletin Board.

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: January 1996