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Southeastern Manufacturing Survey

For immediate release Oct. 13, 1999

SOUTHEASTERN MANUFACTURING SURVEY IN SEPTEMBER:
CURRENT ACTIVITY AND OUTLOOK IMPROVE, INVENTORIES DOWN

According to the monthly survey of southeastern manufacturers conducted by the Federal Reserve Bank of Atlanta, most current indicators of manufacturing activity in the region showed improvement in September following declines in August. In addition to production, current activity indexes for shipments, new orders and the employee workweek posted increases. The indexes for backlog orders, materials inventories and finished goods inventories fell significantly. Current price indexes rose while outlook price indexes edged down.

The current production index in September rebounded to 7.1 from a minus 2.4 in August. Swings during summer tend to be large and somewhat variable, resulting in seasonally adjusted data that are more volatile over those months. The proportion of respondents reporting higher production rose to 31.3 percent from 26.7 percent in August, while the proportion indicating a decrease dropped to 24.2 percent in September from 29.1 percent in the prior month. Discounting recent volatility, production is modestly positive but not growing as strongly as seen during the spring of this year.

Of notable interest, both current inventory indexes fell sharply in September, suggesting unexpectedly strong demand. The current materials inventory index fell to minus 11.8 in September from 1.9 in August. The current finished goods inventory index dropped to minus 23.8 from 2.7 in August. September's figure is a new low for this series.

Outlook indexes mostly improved in September. The outlook index for production rose to 26.4 in September from 23.8 in August. Outlook indexes for shipments, new orders, materials inventories, finished goods inventories, the average workweek, capital expenditures, new orders for exports and supplier delivery time also rose in September. The increase in the outlook index for new orders was particularly sharp after a very weak number in August. Gains in both outlook indexes for inventories were notable, posting the first positives in several months. The gains for these outlook indexes suggest that current inventory draw-downs were more than expected and that producers anticipate rebuilding inventories early next year.

Current price indexes rose further while outlook price indexes slipped. For both current and outlook, prices paid indexes remained at moderately high levels while for prices received, the indexes remained modestly firmer than seen during late 1998. The current prices received index rose to 8.8 in September from 5.3 the prior month. The current prices paid index edged up to 25.4 in September from 24.0 in August. The latest month is the highest figure since June 1995. Outlook prices edged down only slightly from recent highs seen in July and August, suggesting that manufacturers do not see the current firming in material costs as temporary.


Summary of Southeastern Manufacturing Conditions
Diffusion Indexes
Seasonally Adjusted

Current Month Versus Prior Month
1999


September August
(R)
July

Production 7.1 -2.4 24.3
Shipments 13.7 11.2 17.0
New orders 13.9 8.1 14.2
Backlog of orders -11.1 8.2 3.0
Materials inventories -11.8 1.9 1.5
Inventories of finished goods -23.8 2.7 8.7
Number of employees 2.8 4.3 11.4
Average workweek 3.0 -2.7 4.5
Prices received 8.8 5.3 7.8
Prices paid 25.4 24.0 23.4
New export orders 3.6 4.9 -6.5
Supplier delivery time 0.0 9.3 4.0
Industry business conditions 11.6 7.6 16.2

Six Months From Now Versus Current Month

September August
(R)
July

Production 26.4 23.8 28.1
Shipments 28.8 24.0 31.7
New orders 26.8 10.6 31.3
Backlog of orders 3.0 3.8 9.9
Materials inventories 0.3 -5.5 -12.3
Inventories of finished goods 3.6 -5.8 -8.3
Number of employees 2.0 8.0 4.6
Average workweek -4.2 -7.7 0.0
Prices received 27.8 29.6 26.3
Prices paid 28.8 30.4 31.0
Capital expenditures 18.5 12.6 19.7
New export orders 14.3 12.5 15.9
Supplier delivery time -1.6 -4.1 0.0
Industry business conditions 31.1 27.4 28.5

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
Chart 2
Summary of Southeastern Manufacturing Conditions: September Data