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Southeastern Manufacturing Survey

Embargoed until 10 a.m. March 13, 1997

SOUTHEASTERN MANUFACTURING IN FEBRUARY:
CURRENT ACTIVITY DROPS BACK TO MODERATE LEVEL; OUTLOOK EDGES DOWN

Manufacturing growth in the Southeast slowed in February, moving back to a moderate level after two months of sharp swings. According to the monthly survey conducted by the Federal Reserve Bank of Atlanta, the proportion of southeastern manufacturers reporting gains in production fell noticeably after a sharp catch-up in January from a very weak December. Current activity indexes for February, however, generally remained near the moderately positive levels of the last four or five months. Changes in manufacturers' expectations were generally small.

In February the proportion of survey respondents reporting increased production fell 12 percentage points to 31 percent, after jumping to 43 percent in January. The share reporting a decline in production rose by a moderate 5 percentage points in February. As a result, the diffusion index for production declined from 24 in January to 7 in February. It was little changed from levels in October and November of last year. Shipments and new orders indexes also weakened but continued to be positive. The February new orders index actually was at its highest level in over two years, except for the sharply increased level reported in January. Current activity indexes for the number of employees and for the average workweek edged down but remained near the zero mark.

The survey provides little indication of re-emerging inflation. Current price indexes continued a mild rise from low levels recorded during the past 18 months. The index for prices received rose to 1 in February from minus 3 in January and minus 16 in December. February's figure is the first positive figure for this index in 16 months, but it was well below indexes of 1994 and early 1995. About three-fourths of the respondents reported no change in prices received for February. The prices paid diffusion index also continued to rise from low levels -- reaching 18 in February from 17 in January and a recent low of 2 in the past November.

The supplier delivery index, although edging down to 1 in February from 2 the month before, has shown no net change over the last five months. Supplies remain readily available and show few potentially inflationary bottlenecks as 93 percent of respondents indicated no change in delivery time.

Outlook indexes in February generally remained positive, suggesting gains ahead over the next few months. The production outlook rose only marginally. As has been the case for the last year, about half of the respondents expect higher output in coming months. Shipments, new orders and backlog expectations indexes slipped further from December's above-trend levels, further corroborating an outlook for moderate gains over the next six months. The outlook index for employment and for average workweek declined slightly. Each has been slightly below zero for most of the past three years.

Expected prices indexes were mixed and remained in ranges suggestive of few building price pressures. The expectations index for material prices slipped a bit in February. The outlook index for prices received for finished products rebounded somewhat. About two-thirds of respondents reported no change in prices for finished products.

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, or visit the U.S. Commerce Department's Economic Bulletin Board.

Summary of Southeastern Manufacturing Conditions: February 1997