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Southeastern Manufacturing Survey

Embargoed until 10 a.m. June 12, 1996**

SOUTHEASTERN MANUFACTURERS IN MAY:
CURRENT ACTIVITY LITTLE CHANGED; OUTLOOK REBOUNDS

According to the monthly survey conducted by the Federal Reserve Bank of Atlanta, the share of southeastern manufacturers reporting gains in production was little changed in May after a noticeable rebound in April. Shipments and new orders behaved similarly. Outlook indicators were mixed as indexes for production and backlogs rebounded to near March levels. The expectations index for new orders slipped, while the shipments index was little changed from April. Current price indexes continued to rise from lows set earlier this year, while outlook price indexes moved little, remaining low.

In May the proportion of survey respondents reporting increased production was stable at 33 percent on a seasonally adjusted basis, while the share reporting declines rose to 24 percent from 22 percent in the previous month. Consequently, the diffusion index for production edged down from its recent high of 11 in April to 10 in May. Little movement was observed in both the shipments and new orders indexes. Both materials and finished goods inventory indexes reached their lowest levels since September 1993. The diffusion index for the number of employees improved, turning marginally positive for the first time since March 1995. Meanwhile, the diffusion index for the average employee workweek jumped to its highest level since October 1994.

For prices received for finished products, 79 percent of respondents reported no change. However, the diffusion index for this series rose in May but remained slightly negative at minus 2, compared to minus 10 in April. The prices-paid index continued to rise, reaching 18 in May from 14 in April. Sixty-five percent of respondents observed no change in material prices as compared with 63 percent last month.

Expectations for future manufacturing activity rebounded. The production index jumped to 30 in May from 23 in April. Fifty percent of respondents expect higher output in six months, compared to 45 percent in April. Expectations for new orders slipped, while shipments were little changed. The employment outlook index jumped significantly in May, reaching its highest level since April 1994 and moving out of negative territory. The average workweek index became slightly negative. The index for capital investment plans improved further from January's series low. The indexes for both expected materials prices and expected finished goods prices 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 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.

**For reprints and historical data, see http://www.frbatlanta.org on the World-Wide Web or visit the U.S. Commerce Department's Economic Bulletin Board.

Summary of Southeastern Manufacturing Conditions: May 1996