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Southeastern Manufacturing Survey

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

SOUTHEASTERN MANUFACTURERS IN FEBRUARY:
CURRENT ACTIVITY DECLINES; OUTLOOK REBOUNDS

According to the monthly survey conducted by the Federal Reserve Bank of Atlanta, the share of southeastern manufacturers reporting gains in production dropped in February after a mild rebound in January. Other measures of current activity--including new orders, backlogs, and number of employees--also fell. At the same time, most outlook indicators generally rebounded noticeably. Current price indexes declined to, or near, series lows, while expectations' price indexes rebounded.

In February, the proportion of survey respondents reporting increased production fell to 24 percent from January's 30 percent. The diffusion index for production dropped to minus 9.0 in February from plus 3.7 in January, as the share reporting lower output increased to 33 percent from 27 percent the month before. The index for new orders set a new low at minus 15, while order backlogs tied the series low of minus 21 set in July 1993. After showing modest improvement in January, the diffusion index for the number of employees dipped to minus 11. This index has been in negative territory since April 1995. The workweek index also fell slightly in February after improving moderately in January.

Current price diffusion indexes fell. The share of respondents indicating increased prices received dropped to 9 percent from 14 percent in January, while the share reporting lower prices received rose to 22 percent from 17 percent the month before. The proportion of manufacturers paying higher prices for raw materials fell to 16 percent in February from 22 percent in January. The share reporting paying lower prices for raw materials rose to 19 percent from 15 percent in January. This diffusion index set a new low, with the diffusion index turning negative for the first time in the series four year history.

Expectations for future manufacturing activity generally rebounded in February. Forty-eight percent of respondents expect higher output in six months, compared with 37 percent in January. The output diffusion index in February stood at 28.2, compared with 14.5 in January. Expectations for shipments, new orders, backlogs, and average workweek also rebounded. The backlogs outlook index is at its highest in two years. However, expectations for capital expenditures fell to a series low in February, and the outlook index for the number of employees showed little change. In contrast to current price indexes, the expectations indexes for prices received for finished products and for prices paid for raw materials both rebounded moderately in February.

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: February 1996