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Southeastern Manufacturing Survey

For Immediate Release Feb. 12, 1998

SOUTHEASTERN MANUFACTURING SURVEY IN JANUARY:
CURRENT ACTIVITY AND PRICES SOFT; PRODUCTION OUTLOOK UP

According to the monthly survey of southeastern manufacturers conducted by the Federal Reserve Bank of Atlanta, current activity indicators in January were mixed but remained generally soft compared to most of 1997. Indexes for output, shipments and the average workweek inched up from conditions in December, while the index for the number of employees rose moderately. The new orders and backlog orders indexes were essentially unchanged. The current prices received index moved up in January, while that for prices paid rebounded noticeably from a low level. While outlook activity indicators were mixed overall, the outlook index for production rebounded strongly in January. Both current and outlook indexes of new orders for exports showed little change in January.

The production index in January increased to plus 3.2 from a revised minus 1.2 in December. December's figure incorporates new seasonal factors as well as late reports. The proportion of respondents reporting higher production in January edged up to 31.7 percent from 29.5 percent in December, while the share reporting lower output declined to 28.5 percent from 30.7 percent the month before.

January manufacturing activity appears to be slowly recovering from a brief inventory adjustment, notably reflected in weak output in December and continued sluggish orders in January. The new orders index in January was soft but steady. The backlogs index remained mildly negative for the third consecutive month. Materials inventories were flat and negative for the second month in a row; the finished goods inventory index was unchanged. Manufacturers may be somewhat optimistic about near-term output improvement, as the index for the number of employees jumped from 3.8 in December to 9.9 in January, and the average workweek index showed mild improvement.

The current prices received index moved up to minus 2.9 in January from minus 6.9 the prior month. December's figure was the lowest level since December 1996. The current prices paid index rebounded to 7.7 in January from 1.0 in December.

The production outlook index rebounded in January to 46.1 from 36.5 in December—likely reflecting a view that current softness in output is temporary. January's figure was the highest since January 1993. The outlook index for new orders was little changed, remaining at the moderate levels seen over most of the past three years, while the backlogs index was down somewhat. The outlook index for backlogs had been at double-digit levels for the four previous months. The outlook shipments index was essentially unchanged, remaining at moderately high levels. The outlook indexes for inventory were mixed. The outlook materials inventories rose to positive territory for the first time since June 1996, while the outlook index for finished goods inventories edged down, remaining slightly negative. The outlook index for prices received for finished products was little changed in January at 15.4, while the prices paid outlook index rose to 26.5 from 21.0 in December. This rise likely reflects the view that the notable weakness in the current prices paid index is temporary.


Summary of Southeastern Manufacturing Conditions
Diffusion Indexes
Seasonally Adjusted

Current Month Versus Prior Month



1998 1997


January December (R) November

Production 3.2 -1.2 6.6
Shipments 4.1 2.5 6.4
New orders 7.1 7.3 9.2
Backlog of orders -3.9 -3.8 -3.8
Materials inventories -4.7 -5.1 3.0
Inventories of finished goods 4.6 4.7 10.6
Number of employees 9.9 3.8 1.2
Average workweek 0.1 -2.5 -0.1
Prices received -2.9 -6.9 -1.8
Prices paid 7.7 1.0 12.0
New export orders 2.4 3.6 -3.4
Supplier delivery time 7.1 11.2 12.3
Industry business conditions 8.1 4.9 -2.2

Six Months From Now Versus Current Month


January December (R) November

Production 46.1 36.5 36.4
Shipments 41.1 38.6 38.9
New orders 31.3 30.2 36.9
Backlog of orders 8.4 12.1 17.8
Materials inventories 0.7 -4.5 -6.5
Inventories of finished goods -4.3 -1.7 -9.7
Number of employees 11.5 9.2 7.9
Average workweek 4.9 3.2 -0.2
Prices received 15.4 17.4 16.3
Prices paid 26.5 21.0 28.0
Capital expenditures 23.4 21.7 24.9
New export orders 20.2 21.4 26.7
Supplier delivery time -1.1 -3.2 -3.8
Industry business conditions 18.1 21.8 22.2

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.