Regional Update (July-September 1997)

Index The State of the States Views from the Region Southeastern Manufacturing Survey Southeastern Economic Indicators

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Manufacturing Survey
August Activity Slips From July Surge

ccording to the monthly survey conducted by the Federal Reserve Bank of Atlanta, reports on August manufacturing activity in the Southeast reflect a general reversal of a jump in most measures of current activity reported in July. The production index rebounded in August, continuing at levels not consistently seen since late 1994. However, indexes for shipments, new orders, backlogs and the average workweek dropped below levels reached in the spring after large increases in July.

August's notable reversals suggest that much of the pickup noted in July was related to difficulties in seasonally adjusting some series. Price indexes moved counter to each other but remained at low or moderate levels compared with late 1994 and early 1995. Employment indexes — both current and outlook — remain slightly positive. Outlook indicators, in general, declined in August after remaining at moderate levels for three or four months.

Survey of Southeastern
Manufacturing Conditions, 1992-97

Survey of Southeastern Manufacturing Conditions, 1992-97

The production index in August rebounded to 15 from 10 in July. The proportion of survey respondents reporting increased production edged up to 36 percent from 34 percent in July, while those reporting declining production dropped to 20 percent in August from 24 percent the month before.

Other indicators of current activity generally reversed large gains seen in July. The new orders index declined to 5 in August from 19 in July, while the backlogs index dropped to minus 13 from plus 14 in July. Although the employment index edged down to 6 in August from 10 in July, this level is suggestive of moderate strength because this index has been in the positive range for 11 consecutive months.

Current price indexes were mixed in direction but stood at low or moderate levels. The prices received index dropped to 2 from 11 in July. The current raw material prices index rose to 13 in August from 8 the month before. The supplier delivery time index jumped noticeably in August — to 10 from 1 in July — and was at its highest level since March 1995. Not only did more plants report an increase in delivery time, but no respondents indicated that delivery time had fallen. This slowing in deliveries may have been strike related.

Outlook indexes generally declined in August but remained at moderate levels. The outlook production index dropped to 28 from 37 in July. This index has been relatively steady over the last year although August's level was down from moderate levels seen over the prior four months. Forty-six percent of August's respondents expected higher output in coming months, while only 17 percent anticipated lower levels. Softening also was seen in August for outlook indexes for shipments and new orders. The outlook employment index was steady at a moderately positive level, 9 compared to 8 in July, while the expectations average workweek index rose from minus 1 in July to 3 in August.

Over 50 percent of reporting manufacturers expect no change in either prices received or prices paid, but both outlook indexes declined in August. The expectations prices paid index dropped from 33 in July to 22 — the lowest level since August 1996. The outlook prices received index slipped from 26 in July to 20.

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, August 1997
Seasonally Adjusted
August vs. July
Six Months from August
Southeastern Plant Indicators Decrease No
Increase Diffusion
Decrease No
Increase Diffusion
Production 20.4 44.0 35.6 15.2 17.2 37.2 45.6 28.4
Volume of shipments 26.6 38.5 34.9 8.4 22.9 32.5 44.6 21.6
Volume of new orders 24.9 45.3 29.8 4.8 18.4 33.0 48.6 30.2
Backlog of orders 29.7 53.7 16.6 -13.1 19.8 55.5 24.6 4.8
18.3 62.9 18.9 0.6 23.3 54.8 21.9 -1.4
26.5 52.8 20.8 -5.7 22.8 52.7 24.5 1.8
Number of employees 10.3 73.2 16.6 6.3 14.1 62.9 23.0 9.0
Average employee workweek 16.3 71.9 11.8 -4.4 11.3 74.3 14.4 3.1
Prices received for finished product2 11.4 75.2 13.3 1.9 10.1 59.9 30.1 20.0
Prices paid for raw materials 7.6 71.6 20.8 13.2 11.9 53.8 34.3 22.4
Capital expenditures -- -- -- -- 17.2 50.1 32.7 15.5
New orders for exports3 7.3 76.8 15.9 8.5 7.1 65.9 27.1 20.0
Supplier delivery time4 9.7 90.3 0.0 9.7 4.0 90.1 5.9 -2.0
Industry business activity, national 16.3 50.5 33.2 16.9 17.6 41.6 40.9 23.3
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. 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.