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Southeastern Manufacturing Survey

For Immediate Release Sept. 14, 1998

SOUTHEASTERN MANUFACTURING SURVEY IN AUGUST:
OUTLOOK SLIPS WHILE PRICES ARE MIXED, STILL SOFT

According to the monthly survey of southeastern manufacturers conducted by the Federal Reserve Bank of Atlanta, indexes for current activity were mixed in direction, while outlook indexes were almost uniformly down. The latest data on current and outlook inventory indexes suggest that manufacturers are planning output and inventory adjustments. Price indexes remained weak.

While new orders, backlogs and average workweek indexes were up slightly in August, the index for current output slipped after a July rebound. The shipments index fell marginally, while inventory indexes were up — notably so for finished goods inventories. The production index in August declined to 15.3 from a revised 22.1 in July. The proportion of respondents reporting higher production in August edged up to 38.4 percent from 35.7 percent the prior month, but the proportion of respondents reporting declines increased to 23.1 percent in August from 13.5 percent in July.

Despite a moderate rebound, the new orders index remains soft, below levels seen during the February-May period this year. Shipments have been softer the past two months. The finished goods inventory index jumped to 29.2 in August from 5.2 in July, with the latest month's figure representing a series high. The new export orders index rebounded to zero after a sharp drop to a series low of minus 11.0 in July. Current price indexes rose moderately but remained negative. The prices paid index has been negative for five consecutive months. Until February, this series had never been in the negative range.

Outlook indexes in August continued a general decline going back to early 1998. The outlook index for production slipped to 25.7 in August from 29.1 in July. The outlook indexes for shipments, new orders, backlogs, number of employees and new orders for exports also declined in August. Both inventory outlook indexes fell sharply to levels not seen since early 1996. These declines in outlook indexes for inventories support the view that current increases in inventories are unplanned to some extent, that adjustments are expected and that future output may be dampened. The outlook for new export orders is notably weak, with the six-months-out index down sharply, setting a new series low. The capital expenditures outlook index rebounded to 19.1 in August compared with 14.5 in July but remained below levels reported during the previous year.

Outlook price indexes declined. While the outlook index for prices received slipped somewhat, the outlook index for prices paid dropped to a new series low — to 10.2 in August from 17.6 in July. The previous low of 13.5 occurred in March 1996, and the series high of 64.0 was set in January 1995.


Summary of Southeastern Manufacturing Conditions
Diffusion Indexes
Seasonally Adjusted

Current Month Versus Prior Month
1998


August July (R) June

Production 15.3 22.1 10.1
Shipments 5.5 7.0 12.0
New orders 8.8 1.6 7.8
Backlog of orders 5.5 0.9 0.0
Materials inventories 11.2 0.6 2.6
Inventories of finished goods 29.2 5.2 -2.8
Number of employees 7.0 8.0 0.2
Average workweek 9.2 6.8 -1.4
Prices received -5.2 -10.6 -5.6
Prices paid -9.3 -14.9 -11.2
New export orders 0.0 -11.0 2.3
Supplier delivery time 4.4 8.7 5.2
Industry business conditions -12.1 1.2 11.7

Six Months From Now Versus Current Month

August July (R) June

Production 25.7 29.1 36.2
Shipments 20.5 27.5 30.6
New orders 14.0 20.6 23.6
Backlog of orders -2.6 4.3 11.9
Materials inventories -17.4 -7.3 -8.3
Inventories of finished goods -15.4 -1.7 -2.2
Number of employees 3.2 11.3 18.5
Average workweek -4.9 -6.2 3.6
Prices received 12.8 14.3 10.9
Prices paid 10.2 17.6 14.2
Capital expenditures 19.1 14.5 24.7
New export orders 2.5 6.8 10.3
Supplier delivery time -8.0 -2.2 -2.1
Industry business conditions 10.2 14.0 24.3

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: August 1998 data