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Southeastern Manufacturing Survey

For immediate release Feb. 14, 2000

SOUTHEASTERN MANUFACTURING SURVEY IN JANUARY:
CURRENT PRODUCTION FLATTENS BUT OUTLOOK IS ROBUST

According to the monthly survey of Southeastern manufacturers conducted by the Federal Reserve Bank of Atlanta, most current indicators of manufacturing activity in the region declined from relatively strong levels of activity seen in the fourth quarter of 1999 but remained in the modestly positive range. Generally, outlook indicators rose sharply. Current price indexes were down somewhat after several strong months, while outlook prices indexes rebounded significantly.

Post-Y2K manufacturing in the Southeast appears to be taking a brief pause after a robust fourth quarter. The current production index in January dropped to 7.9 from 27.9 in December. The proportion of respondents reporting higher production fell to 30.7 percent from 44.5 percent, while the proportion reporting lower production rose to 22.8 percent from 16.7 percent. The current activity index for shipments followed a similar pattern. Somewhat more forward looking, the new orders and backlog indexes declined more moderately than production and shipments indexes. Outlook indexes, however, indicate that many manufacturers believe current softness is temporary.

In January, outlook indicators for many types of activity were up sharply from December. The outlook index for production jumped to 35.2 in January from 24.1 in December. Outlook indexes for shipments and new orders also surged. Showing more moderate increases were outlook indexes for backlogs, finished goods inventories, the number of employees and the average workweek. The outlook index for the workweek was particularly strong after seven months of modest weakness. The capital expenditures outlook index rose notably in January after softness in the fourth quarter. This index has been somewhat more volatile in recent months — perhaps reflecting uncertainty over Y2K issues — but the latest rise may reflect manufacturers' being more optimistic after a relatively uneventful century date change. Outlook indexes for materials and finished goods inventories were mixed but remained near typical values, suggesting few inventory concerns. The outlook index for new orders for exports declined somewhat after a sharp gain in December.

On the price front, the current prices received index was down sharply and was negative after a strong November and December — also an apparent Y2K effect. The current prices paid index also was down but remained at a moderately strong level, reflecting greater price pressure on commodities. It appears that manufacturers believe current price softness is temporary. The outlook indexes for prices received and for prices paid rebounded significantly in January. The outlook prices received index was at its highest level since January 1995 while the outlook index for prices paid reached its highest level since May 1995.


Summary of Southeastern Manufacturing Conditions
Diffusion Indexes
Seasonally Adjusted

Current Month Versus Prior Month

2000 1999

January December (R)
November (R)

Production 7.9 27.9 26.8
Shipments 5.6 25.3 32.4
New orders 10.9 12.5 8.9
Backlog of orders 0.7 5.0 3.7
Materials inventories 6.6 8.8 6.8
Inventories of finished goods 7.9 5.3 -5.5
Number of employees -1.7 1.8 2.0
Average workweek 10.6 8.4 8.6
Prices received -0.7 15.0 13.9
Prices paid 16.9 21.9 20.8
New export orders 0.0 3.0 2.7
Supplier delivery time 1.2 7.8 11.4
Industry business conditions 9.8 12.6 18.3

Six Months From Now Versus Current Month

January December (R)
November (R)

Production 35.2 24.1 22.4
Shipments 42.5 22.8 24.4
New orders 43.1 18.2 17.2
Backlog of orders 4.6 2.4 6.3
Materials inventories -12.7 -11.3 -13.8
Inventories of finished goods -1.3 -7.8 -13.8
Number of employees 4.9 0.0 -5.6
Average workweek 6.7 -5.4 -5.6
Prices received 34.2 19.8 26.4
Prices paid 40.3 29.6 34.8
Capital expenditures 21.0 14.3 15.1
New export orders 11.4 22.1 8.1
Supplier delivery time -4.9 -1.3 -8.1
Industry business conditions 32.5 17.7 18.7

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.

Chart 1
Chart 2
Summary of Southeastern Manufacturing Conditions: January 2000 Data