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Southeastern Manufacturing Survey

For Immediate Release Nov. 13, 1998

SOUTHEASTERN MANUFACTURING SURVEY IN OCTOBER: PRODUCTION IMPROVES SLIGHTLY; OUTLOOK STEADY

According to the monthly survey of southeastern manufacturers conducted by the Federal Reserve Bank of Atlanta, current indicators suggest that manufacturing activity in the region remains subdued compared with early this year. The index for current production in October moved up slightly from its September value, while current indexes for shipments, new orders and supplier delivery time were little changed. Indexes for backlogs, material inventories, finished goods inventories, employee workweek and new orders for exports declined. Current price indexes also recorded modest declines. Outlook indexes generally held steady at moderately positive levels.

The production index in October increased to 4.7 after falling to minus 2.6 in September. For October the proportion of respondents reporting higher production rose to 32.6 percent from 26.8 percent the previous month, while the proportion indicating a decrease declined to 27.8 percent from 29.3 percent. In a year-over-year comparison, production and new orders indexes have been soft in recent months, especially in October.

Despite the modest rebound in the production index, current activity is still somewhat subdued compared with the previous seven months. The shipments and the new order indexes were little changed, while the backlog index fell to minus 7.0, its lowest level since August 1997. Most manufacturers kept inventories unchanged, but more respondents allowed inventories to decline than those allowing inventories to rise. The indexes for both finished goods and materials inventories fell for the second month in a row and turned negative in October. The number of employees index improved slightly, while the workweek index declined slightly.

Weak economic growth for many trading partners is continuing to dampen manufacturing in the Southeast. The new orders for export index declined sharply, reaching a series low.

Current price indexes declined once again. The prices paid index fell to near its series low, while the prices received for finished goods index reached its lowest level since December 1996. Both series have been notably weak since June 1998.

Outlook indexes for production and shipments were little changed in October, remaining at levels somewhat below those seen earlier this year. The outlook index for production edged up to 28.1 in October from 27.0 in September, with 43.5 percent of the respondents expecting higher output in six months. The outlook index for materials inventories turned positive for the first time in six months. The outlook index for number of employees also increased modestly. Outlook price series were mixed in direction of change from last month but remained low. Expected new orders for exports improved after turning negative in September. This index remains low relative to its historical performance, reflecting manufacturers' concerns about export markets.


Summary of Southeastern Manufacturing Conditions
Diffusion Indexes
Seasonally Adjusted

Current Month Versus Prior Month
1998


October September (R) August

Production 4.7 -2.6 12.1
Shipments 4.9 3.7 5.1
New orders 0.0 0.7 7.1
Backlog of orders -7.0 -1.0 2.6
Materials inventories -6.9 3.4 9.7
Inventories of finished goods -3.5 0.6 28.6
Number of employees 2.4 0.9 6.1
Average workweek 2.9 5.4 9.0
Prices received -12.4 -7.6 -5.9
Prices paid -13.8 -6.8 -9.7
New export orders -16.4 -3.7 0.0
Supplier delivery time 7.7 6.1 4.1
Industry business conditions -3.9 1.2 -11.9

Six Months From Now Versus Current Month

October September (R) August

Production 28.1 27.0 25.0
Shipments 26.2 27.2 21.0
New orders 21.5 28.1 18.5
Backlog of orders 0.9 4.3 1.9
Materials inventories 3.4 -11.7 -16.9
Inventories of finished goods -3.1 -15.1 -15.9
Number of employees 9.5 3.6 5.5
Average workweek -1.7 -1.1 -2.9
Prices received 6.2 5.4 11.1
Prices paid 10.3 14.7 10.4
Capital expenditures 17.0 19.7 17.0
New export orders 7.9 -2.5 1.2
Supplier delivery time -6.6 -6.2 -6.4
Industry business conditions 12.0 8.8 10.6

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.

Chart 1

Summary of Southeastern Manufacturing Conditions: October 1998 data