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Southeastern Manufacturing Survey

For Immediate Release Oct. 14, 1998


According to the monthly survey of southeastern manufacturers conducted by the Federal Reserve Bank of Atlanta, indexes for current activity in September generally were lower than the month before. Outlook indexes were up somewhat, indicating that recent weakness is not expected to continue at its current level. In September, the production index fell noticeably. Current indexes also were down for shipments, new orders, backlogs, materials inventories, finished goods inventories, number of employees, workweek and new orders for exports. The drop in the index for finished goods inventories was notably sharp. Current price indexes slipped after modest increases in August.

The production index in September dropped to 1.2 from a revised 12.1 in August. The production index in September was at its lowest since December 1997. For September, the proportion of respondents reporting higher production fell to 27.3 percent from 36.2 percent the prior month, while the proportion of respondents reporting no change rose to 46.6 percent from 39.7 percent in August.

Inventory adjustments probably played a role in September's production weakness. The finished goods inventory index fell to minus 0.8 in September after a large jump from 5.2 in July to 28.6 in August, indicating some of the August accumulation was unplanned. Current activity weakness is likely in the very near term as the new orders index fell to minus 1.1 from a positive 7.1 in August. The latest figure is the lowest for the new orders index since December 1996. The new export orders index declined to minus 4.2 in September from 0.0 in August. This index has been negative two of the last three months, with July's figure being a series low.

Current price indexes declined. The prices paid index has been negative for six consecutive months, and the September figure of minus 10.0 was near the series low of minus 14.9 set in July 1998. Until February of this year, this series had never been in the negative range. The prices received index fell noticeably from minus 5.9 in August to minus 11.8 in September. This index has been on a modest weakening path since June of this year.

Outlook indexes in September turned upward after several months of a general decline going back to early 1998. Some of this improvement in outlook indexes may merely reflect unusually low current output that is related to inventory adjustments. As a result, manufacturers may simply be optimistic that current activity will rebound modestly. The outlook index for production rose to 26.9 in September from 25.0 in August. Gains were more notable in the outlook indexes for shipments and new orders. Mild increases were reported in the indexes for backlogs, average workweek, materials inventories and finished goods inventories. The outlook index for new export orders slipped for the fifth consecutive month, setting a third consecutive monthly series low. This was the one area of real activity in which manufacturers were less positive about the six-month outlook than current conditions. The capital expenditures outlook index was little changed at a moderate level of 18.6 in September, but the index remained below levels reported during the previous year.

Outlook price indexes moved in different directions but remained low. The outlook index for prices received declined to 7.4 from 11.1 in August. The latest figure is the lowest since November 1996. The outlook index for prices paid rebounded to 16.1 from the series low of 10.4 in August.

Summary of Southeastern Manufacturing Conditions
Diffusion Indexes
Seasonally Adjusted

Current Month Versus Prior Month

September August (R) July

Production 1.2 12.1 22.1
Shipments 0.8 5.1 7.0
New orders -1.1 7.1 1.6
Backlog of orders -2.2 2.6 0.9
Materials inventories 6.1 9.7 0.6
Inventories of finished goods -0.8 28.6 5.2
Number of employees 1.5 6.1 8.0
Average workweek 4.2 9.0 6.8
Prices received -11.8 -5.9 -10.6
Prices paid -10.0 -9.7 -14.9
New export orders -4.2 0.0 -11.0
Supplier delivery time 7.1 4.1 8.7
Industry business conditions -1.0 -11.9 1.2

Six Months From Now Versus Current Month

September August (R) July

Production 26.9 25.0 29.1
Shipments 30.0 21.0 27.5
New orders 26.2 18.5 20.6
Backlog of orders 3.3 1.9 4.3
Materials inventories -11.4 -16.9 -7.3
Inventories of finished goods -14.1 -15.9 -1.7
Number of employees 4.2 5.5 11.3
Average workweek 1.6 -2.9 -6.2
Prices received 7.4 11.1 14.3
Prices paid 16.1 10.4 17.6
Capital expenditures 18.6 17.0 14.5
New export orders 0.0 1.2 6.8
Supplier delivery time -7.1 -6.4 -2.2
Industry business conditions 9.6 10.6 14.0


 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.

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Summary of Southeastern Manufacturing Conditions: September 1998 data