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Southeastern Manufacturing Survey

For Immediate Release March 12, 1998

SOUTHEASTERN MANUFACTURING SURVEY IN FEBRUARY:
CURRENT ACTIVITY REBOUNDS; INVENTORIES LEAN; PRICES MIXED

According to the monthly survey of southeastern manufacturers conducted by the Federal Reserve Bank of Atlanta, current activity indicators rebounded in February after several soft months. Indexes for output and shipments rose noticeably from January's levels, while indexes for new orders and for the average workweek edged up. Materials inventories were little changed, but the finished goods inventories index dropped sharply. The index for prices received edged up for both current and outlook indexes, while the index for prices paid, both current and outlook indexes, declined. Future activity indicators in general were mixed.

The production index in February jumped to 18.5 from a revised 3.9 in January. The proportion of respondents reporting higher production in February increased to 40.6 percent from 32.5 percent in the prior month, while the share reporting lower output dropped to 22.1 percent from 28.6 percent the month before.

The boost in February's manufacturing activity may partially reflect an attempt to rebuild inventories that were drawn down more than expected in recent months. Output had been sluggish from November 1997 through January 1998 after the finished goods inventories index posted its strongest three consecutive months during September through November 1997. However, the February finished goods inventories index dropped from a plus 2.8 in January to a minus 13.0 in February for the fifth consecutive monthly decline. February's figure is a new series low. Materials inventories were flat and negative for the third month in a row.

The new orders index in February edged up for the second month but remained at a moderate level. The backlogs index remained mildly negative for the fourth consecutive month. Another sign of moderate optimism, the number of employees index remained just below the series high of 12.8 set in November 1994. The new export orders index rebounded noticeably in February after four consecutive weak months.

The current prices received index moved up for the second month — to zero in February from minus 1.8 in January. In contrast, the current prices-paid index dropped sharply to minus 9.1 in February from plus 8.0 in January.

The production outlook index slipped in February to 39.2 from 44.3 in the prior month. The latest dip is consistent with the view that February's current output jump is a return to more normal levels of moderate output gains after production sluggishness in prior months. The outlook index for new orders has shown little change since December, remaining at moderate levels seen over most of the past three years. Outlook indexes for inventories were up in February — likely reflecting manufacturers' view that current inventory levels are too low. The materials inventories outlook index rose moderately, while that for finished goods inventories rose sharply — from minus 4.5 in January to plus 6.3 in February. The February number was the highest since June 1996. The outlook index for output prices received moved up to 19.9, coming off a recent low of 13.0 in January. Meanwhile, the input prices paid outlook index edged down to 21.6 after a slight rise in January.


Summary of Southeastern Manufacturing Conditions 
Diffusion Indexes 
Seasonally Adjusted 

 Current Month Versus Prior Month

1998 1997

February January (R) December

Production 18.5 3.9 -1.2
Shipments 14.8 3.4 2.5
New orders 9.6 7.5 7.3
Backlog of orders -2.9 -2.6 -3.8
Materials Inventories -2.8 -5.0 -5.1
Inventories of finished goods -13.0 2.8 4.7
Number of employees 11.7 11.5 3.8
Average workweek 2.5 0.5 -2.5
Prices received 0.0 -1.8 -6.9
Prices paid -9.1 8.0 1.0
New export orders 9.0 0.0 3.6
Supplier delivery time 7.5 5.7 11.2
Industry business conditions 14.0 8.8 4.9

Six Months From Now Versus Current Month

February January (R) December

Production 39.2 44.3 36.5
Shipments 34.0 40.0 38.6
New orders 31.1 31.7 30.2
Backlog of orders 7.4 8.2 12.1
Materials inventories 3.1 -0.7 -4.5
Inventories of finished goods 6.3 -4.5 -1.7
Number of employees 10.7 11.2 9.2
Average workweek 4.8 3.4 3.2
Prices received 19.9 13.0 17.4
Prices paid 21.6 24.0 21.0
Capital expenditures 19.5 23.1 21.7
New export orders 19.5 19.8 21.4
Supplier delivery time 5.4 -1.0 -3.2
Industry business conditions 31.6 20.3 21.8

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: February 1998 data