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Southeastern Manufacturing Survey

For Immediate Release July 14, 1998

SOUTHEASTERN MANUFACTURING SURVEY IN JUNE:
CURRENT ACTIVITY AND PRICES SOFTEN; OUTLOOK MIXED

According to the monthly survey of southeastern manufacturers conducted by the Federal Reserve Bank of Atlanta, the June index for current output fell noticeably from the May level, while new orders, shipments, inventories and the number of employees also declined. Current output and new orders indexes, however, remained at moderate levels. In the current price indexes, the prices received index edged down, while the prices paid index fell significantly, setting a record low. Outlook indicators changed only slightly, remaining at moderate levels. The outlook index for new export orders and the future indexes for prices declined, however.

The production index in June dropped to 14.7 from a revised 24.5 in May. This decline followed two strong months and a jump in inventory indexes in May. The proportion of respondents reporting higher production in June fell to 38.4 percent from 44.1 percent in May, while the proportion of respondents reporting declines rose to 23.7 percent in June from 19.6 percent the prior month.

Weakening in the current indexes was widespread. The current indexes for shipments and for new orders were at their lowest levels since early in the year. The index for materials inventories was down in June after a strong May, but in June more respondents still reported higher inventories than those reporting lower inventories. The index for finished goods inventories fell sharply from a very high level in May. The number of employees index fell sharply after five strong months. The workweek also declined from strong levels observed during the last three months.

Commentary from respondents indicated that they view current softness in activity as a consequence of weakness in Asian economies, import competition in general and the General Motors strike.

Current prices also softened. The prices received index slipped from plus 0.8 in May to minus 4.3 in June. Notably, the prices paid index fell sharply to minus 12.0 from minus 0.8 in May. June's prices paid index set a new record low.

Outlook indexes were mixed in direction. The outlook index for production nudged up to 35.9 from 32.6 in May. By contrast, the new orders index fell noticeably. The outlook index for new orders dropped to 22.7 from 29.3 in May. The outlook index for the number of employees rose in June after a slight dip the month before. This index has been at relatively high levels for the last six months. Both outlook price indexes declined in June. The outlook index for prices received has been volatile in recent months, while the index for prices paid has been on a downward trend since November 1997. Notably, the outlook index for new export orders fell sharply in June to 8.1 from 13.7 in May. This index has been declining since late 1997 and set a new series low in June.


Summary of Southeastern Manufacturing Conditions
Diffusion Indexes
Seasonally Adjusted

Current Month Versus Prior Month
1998


June May (R) April

Production 14.7 24.5 23.5
Shipments 15.9 20.2 26.6
New orders 14.9 15.3 18.2
Backlog of orders 2.3 2.3 -3.2
Materials inventories 4.2 14.0 7.6
Inventories of finished goods -7.3 22.6 -0.5
Number of employees 1.2 12.0 12.4
Average workweek 4.9 9.9 10.5
Prices received -4.3 0.8 -0.9
Prices paid -12.0 -0.8 -0.9
New export orders 5.6 7.1 8.2
Supplier delivery time 6.1 1.7 4.9
Industry business conditions 17.6 17.4 20.2

Six Months From Now Versus Current Month

June May (R) April

Production 35.9 32.6 37.4
Shipments 28.8 32.6 35.6
New orders 22.7 29.3 28.6
Backlog of orders 13.3 12.4 11.2
Materials inventories -11.2 -8.6 -7.4
Inventories of finished goods -1.1 -4.6 -6.6
Number of employees 17.8 11.3 12.3
Average workweek 2.7 1.9 -1.3
Prices received 8.9 14.2 9.9
Prices paid 10.4 16.6 16.9
Capital expenditures 24.4 22.5 26.4
New export orders 8.1 13.7 17.6
Supplier delivery time -4.9 -3.4 -3.9
Industry business conditions 22.1 29.4 30.0

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.

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Summary of Southeastern Manufacturing Conditions: June 1998 data