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Southeastern Manufacturing Survey

Embargoed until 10 a.m. January 12, 1996

SOUTHEASTERN MANUFACTURERS IN DECEMBER:
PRODUCTION DECLINES; OUTLOOK STEADY

According to the monthly survey conducted by the Federal Reserve Bank of Atlanta, the share of Southeastern manufacturers reporting gains in production fell in December, the second decline in a row, bringing this measure close to a series low. The proportions reporting increases for shipments and new orders also fell to, or near, series lows. Reflecting weak output reports, diffusion indexes for both the number of employees and for the average workweek were negative. Price indexes were mixed, but remained low relative to past surveys. However, outlook indexes for production, shipments, new orders, and backlogs mostly were little changed compared with November results.

In December, the proportion of survey respondents reporting increased production fell to 26 percent from November's 33 percent. The diffusion index for production dropped to minus 6.8 in December from plus 6.8 in November. The series low for this index is minus 11.0, set in April 1995. Similarly, the diffusion index for new orders fell to minus 12.9 in December from minus 6.7 in November. In December, more respondents, 30 percent, reported higher finished goods inventories than in November, when this share was 21 percent. December was the second weakest month for employment in the four-year history of the survey--only 11 percent of respondents reported gains in their plant's work force, while 24 percent said payrolls were lower in the latest month. Most respondents indicated no change in the average workweek in December.

Reports on current prices were mixed. The proportion of manufacturers receiving higher prices for finished products slipped to 9 percent in December from 12 percent in November. The share reporting paying higher prices for raw materials jumped to 26 percent in December from 19 percent the month before.

Expectations for future manufacturing activity generally held steady in December. Forty-four percent of respondents expect higher output in six months, compared with 42 percent in November. This series has been lower but steady between 42 to 45 percent for the last three months, following a mild rebound to the 55 to 60 percent vicinity in the third quarter. Expectations for new orders, shipments, and backlogs were still soft, although backlogs crept back into positive territory. The employment expectations index improved but remained in negative territory--18 percent expect to add to their labor force in coming months, while 25 percent anticipate workforce reductions. The outlook index for prices received changed little, edging down to a series low of 10.5 from 11.5 in November. The expectations index for prices paid for raw materials fell noticeably to 16.3 in December--also a series low--from 30.9 the month before.

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: December 1995