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Southeastern Manufacturing Survey

For Immediate Release June 12, 1998

SOUTHEASTERN MANUFACTURING SURVEY IN MAY:
CURRENT PRODUCTION UP; OUTLOOK MIXED, HEALTHY

According to the monthly survey of southeastern manufacturers conducted by the Federal Reserve Bank of Atlanta, the May index for current output rose moderately from the April level, while new orders and shipments declined. Inventory indexes were higher in May — notably for finished goods. Employment indicators were up slightly in May, continuing at their highest levels since 1994. For current prices, the prices paid index was flat and weak while the prices received index was up modestly. Supplier delivery time slipped. Indicators of future activity were mixed in direction, but generally at healthy levels.

The production index in May rose to 25.0 from a revised 23.5 in April. May's output index is at the highest level in almost four years. The output index has been at moderately strong levels since February 1998 and has averaged above levels not generally seen since early 1994. The proportion of respondents reporting higher production in May edged down to 44.1 from 46.2 in April, but the share of respondents reporting declines fell to 19.2 in May from 22.7 percent the prior month.

There are signs that the recent forward momentum in southeastern manufacturing may be slowing. The new orders index slipped for the second consecutive month to 16.4 in May from 18.2 in April. The index for new export orders slipped also. The shipments index declined after two relatively strong months in March and April. On net, the backlog index was up modestly in May but was still soft. Both current inventory indexes were up significantly in May, each setting new series highs. However, inventories had been atypically weak in previous months.

The number of employees index suggests southeastern manufacturers have confidence in overall prospects. The current number of employees index rose for the second consecutive month and to its highest level in the series history. The percentage noting an increase in the number of employees rose to 23.3 percent from 22.0 percent in April while those reporting declines stood at 9.5 percent, little changed from 9.6 percent in April. The average workweek index rose for the fifth consecutive month and to its highest level since August 1994.

The current prices received index rebounded to plus 3.7 from minus 0.9 in April but remained soft. The current prices paid index was weak and unchanged at minus 0.9 in May. The supplier delivery time index fell for the second consecutive month and was at its lowest level since December 1996.

Outlook indexes gave mixed signals. The outlook shipments index was steady. The new orders and backlog outlook indexes rebounded from a dip in April. All year they have been above levels generally seen in 1997. Despite the gains in current inventory indexes, outlook inventories also moved up modestly. They remained near historical averages. However, the outlook index for new export orders fell in May to its lowest level since September 1996.


Summary of Southeastern Manufacturing Conditions
Diffusion Indexes
Seasonally Adjusted

Current Month Versus Prior Month
1998


May April (R) March

Production 25.0 23.5 17.0
Shipments 18.2 26.6 22.8
New orders 16.4 18.2 25.2
Backlog of orders 2.0 -3.2 4.6
Materials inventories 13.7 7.6 0.7
Inventories of finished goods 19.8 -0.5 -6.2
Number of employees 13.8 12.4 11.3
Average workweek 11.3 10.5 8.5
Prices received 3.7 -0.9 5.3
Prices paid -0.9 -0.9 4.4
New export orders 5.8 8.2 8.7
Supplier delivery time 0.9 4.9 9.1
Industry business conditions 18.6 20.2 29.5

Six Months From Now Versus Current Month

May April (R) March

Production 33.8 37.4 43.0
Shipments 35.2 35.6 40.6
New orders 33.6 28.6 34.9
Backlog of orders 14.7 11.2 15.2
Materials inventories -5.0 -7.4 6.4
Inventories of finished goods -2.5 -6.6 7.3
Number of employees 10.7 12.3 14.3
Average workweek 4.0 -1.3 8.9
Prices received 15.4 9.9 14.6
Prices paid 16.8 16.9 23.3
Capital expenditures 25.2 26.4 32.2
New export orders 12.2 17.6 14.6
Supplier delivery time -2.9 -3.9 -1.8
Industry business conditions 30.2 30.0 31.6

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.

Summary of Southeastern Manufacturing Conditions: May 1998 data