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Southeastern Manufacturing Survey

For Immediate Release July 14, 1997

SOUTHEASTERN MANUFACTURING SURVEY IN JUNE:
CURRENT PRODUCTION UP; OUTLOOK PRICES AND PRODUCTION RISE

Reports on manufacturing activity in the Southeast reflect a small increase in current production in June compared with May. But forward momentum continues to be healthy as outlook indexes for activity remained near their highest levels in two or three years. Backlogs are expected to decline. Current price conditions remain somewhat soft, but there are some increased reports of pending price pressures. The index for expected prices received for finished goods also jumped to its highest level in over two years, while the index for expected raw material prices rose slightly.

According to the monthly survey conducted by the Federal Reserve Bank of Atlanta, the proportion of southeastern manufacturers reporting gains in production rose marginally, while those experiencing declines in production edged down. As a result, the diffusion index for production rebounded moderately but remained below the April level. Current price indexes were mixed. The index of finished product prices rose slightly from a mild negative to a small positive, while the raw materials index edged down but remained at a moderate level.

In June, the proportion of survey respondents reporting increased production inched up to 35 from 34 in May, while those reporting declining production fell to 20 from 22. The production diffusion index rose to 15 in June from 13 in May. Shipments continued to decline from the recent high set in April and new orders were little changed, while the backlogs index turned slightly negative. Employment indicators showed a boost in new hires as the index for number of employees jumped to its highest level since July 1996. The workweek index turned negative for the first time in six months as more firms cut hours than added hours.

In June, current price indexes gave mixed signals. After dropping to minus 4 in May, prices received rose to plus 1. The series has been mildly positive in three of the last four months—in contrast to consecutive negative months running from November 1995 through January 1997. Data for recent prices received likely represent only a mild firming. The raw material prices index continued to decline after a moderate run-up early in the year.

Outlook indexes remained generally moderate. The production outlook index rose to 41 from 38 in May. This index was the highest since July 1995. Expected shipments and new orders slipped after each jumped significantly in May, but remained near two-year highs set in May.

Backlogs declined somewhat more after a robust May but remained well above levels seen over January through April. Both employment indexes declined. Expected price indexes were up from the prior month as the finished product price index jumped from 21 in May to 31 in June, the highest level since January 1995, and the raw material prices index rose slightly.

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.

Summary of Southeastern Manufacturing Conditions: June 1997 data