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Southeastern Manufacturing Survey

Embargoed until 10 a.m. November 14, 1995

SOUTHEASTERN MANUFACTURERS IN OCTOBER:
PRODUCTION EDGES BACK UP BUT EXPECTATIONS SLIP

According to the monthly survey conducted by the Federal Reserve Bank of Atlanta the share of southeastern manufacturers reporting gains in production during October rose moderately after weakening in August and September. However, fewer manufacturers reported increased new orders, backlogs, and number of employees. The proportion of manufacturers anticipating higher output in six months fell noticeably but remained above series' lows set earlier this year. The share reporting higher inventories of finished goods edged down. Indexes for both prices paid and prices received were little changed from recent months and well below year-ago levels.

In October, the proportion of survey respondents reporting increased production rose to 36 percent from September's 29 percent. The diffusion index for production also rose modestly to 7.2 in October from 2.0 in September. However, the diffusion indexes for new orders and backlogs fell modestly from September to October. The diffusion index for employment hit a record low at minus 14. Only 12 percent of responding manufacturers added to their plant's work force, while 26 percent cut employment. Fewer manufacturers reported higher finished goods inventories in October, 28 percent versus 31 percent in September. The latest month was the lowest since June.

The proportion of manufacturers receiving higher prices for finished products rose slightly from 11 percent in September to 14 percent in October. Over the last two months the prices received series has been at its lowest since the end of 1993. The diffusion index for prices paid for raw materials remained low at 15 in September.

Expectations for future manufacturing activity by Southeastern plants fell noticeably for most indicators. Forty-four percent of the respondents expect increased production in six months, compared with 57 percent in September. The share expecting lower output was little changed at 15 percent and 16 percent in October and September, respectively. Expectations for shipments, new orders, and backlogs weakened similarly and the employment diffusion index turned negative. While the proportion anticipating higher raw materials prices in six months edged up slightly, expected prices received slipped. The diffusion index for expected prices received set a record low at 9, compared with the previous low of 12 set in January 1992, the first month in the series.

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.

Summary of Southeastern Manufacturing Conditions: October 1995