Regional Update (April-June 1997)

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Building the Capital of the New South: A Review of Atlanta Rising

Manufacturing Survey
Current Activity and Prices Slip;
Outlook up Slightly

ince December 1991, the Atlanta Fed has conducted a monthly survey of manufacturing conditions in the Southeast. The survey covers the Sixth Federal Reserve District, which includes Alabama, Florida, Georgia and portions of Louisiana, Mississippi and Tennessee. The plants surveyed represent a cross section of industries in the region.

Current Conditions

Reports on manufacturing in the Southeast generally reflected some slowing in current activity in May, compared with April. According to the monthly survey conducted by the Federal Reserve Bank of Atlanta, the proportion of southeastern manufacturers reporting gains in production and shipments declined moderately. Weakness in new orders and backlogs was more pronounced. Current price indexes declined but weakness was not broad-based.


Outlook indexes generally rose slightly, remaining at moderate levels. Exceptions were the new orders and backlog indexes for expectations six months out, which jumped noticeably. Overall, May data continue to portray a southeastern manufacturing sector with moderate forward momentum despite volatility in the orders series. Prices remain subdued. Manufacturers' employment expectations corroborate optimism about a healthy outlook for southeastern manufacturing.

In May, the proportion of survey respondents reporting increased production slipped to 34 from 38 in April. The production diffusion index declined to 12 in May from 18 in April. May's level is in line with a moderate range seen since January of this year. The diffusion index for shipments also lost some ground but remained at a moderate level. The new orders index, however, fell significantly after a sharp rise in April.

Outlook data suggest recent weakness in this series is temporary. Manufacturers continue to report weak inventory numbers.

In May, current price indexes declined—especially for prices received. The prices received index fell to -5 in May from +4 the month before. May's figure was the lowest level since December 1996. However, almost all of the recent weakening was attributable to responses from firms in the food industry.

Outlook indexes in May generally improved. The production outlook index rose to 37 from 34 in April. This index was at its highest since August 1996. However, indexes for new orders and backlog expectations jumped sharply. The new orders expectations index in May was at its highest level since October 1993. This change likely was a reflection of manufacturers' belief that weakness in May's current new orders was temporary rather than an indication of a pending acceleration in overall manufacturing activity in coming months. The number of employees expectations index rose for the third consecutive month. This index was at its highest level since March 1993. Expected price indexes fell slightly but remained at moderate levels.

Editor's note: This article was contributed by Mark Rogers, forecast coordinator, and Whitney Mancuso, economic analyst, of the Atlanta Fed's research department.

Summary of Southeastern Manufacturing Conditions, May 1997
Seasonally Adjusted
May vs. April
Six Months from May
Southeastern Plant Indicators Decrease No
Increase Diffusion
Decrease No
Increase Diffusion
Production 21.7 44.7 33.7 12.0 10.9 41.3 47.9 37.0
Volume of shipments 19.6 43.2 37.2 17.6 11.1 36.8 52.1 41.1
Volume of new orders 21.4 49.0 29.6 8.2 7.3 42.6 50.1 42.9
Backlog of orders 19.5 59.7 20.8 1.3 13.8 53.3 32.9 19.1
20.5 64.8 14.7 -5.8 22.6 59.1 18.2 -4.4
27.3 47.8 24.9 -2.4 27.7 52.6 19.7 -8.0
Number of employees 17.1 64.7 18.3 1.2 12.3 60.3 27.4 15.1
Average employee workweek 13.4 69.7 17.0 3.6 17.6 66.8 15.6 -2.0
Prices received for finished product2 13.2 78.3 8.5 -4.7 9.7 58.2 32.2 22.5
Prices paid for raw materials 9.3 68.7 22.0 12.7 10.7 50.0 39.3 28.7
Capital expenditures -- -- -- -- 15.9 54.5 29.6 13.8
New orders for exports3 8.3 77.4 14.3 6.0 5.7 65.9 28.4 22.7
Supplier delivery time4 7.1 88.8 4.1 3.1 7.2 84.5 8.2 -1.0
Industry business activity, national 18.2 47.5 34.4 16.2 11.9 41.3 46.8 34.9
1 The diffusion index is calculated as the difference between the percentage of total respondents reporting increases and the percentage reporting declines.
2 Not seasonally adjusted for the month-ago series.
3 Not seasonally adjusted for the month-ago series and the six-months-from-now series.
4 Not seasonally adjusted for the month-ago series and the six-months-from-now series; "decrease" indicates slower, while "increase" indicates faster delivery time. The diffusion index for this indicator reflects that faster delivery time is a negative factor.

Data from 106 respondents. Figures may not sum exactly to 100 because of rounding. Revised tables are available on the U.S. Department of Commerce Bulletin Board. For background on the Survey of Southeastern Manufacturing Conditions, see "Tracking Manufacturing: The Survey of Southeastern Manufacturing Conditions." Click here for historical data, or visit the U.S. Commerce Department's Economic Bulletin Board.