Regional Update (January-March 1998)

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

Cover Story - How Will the Asian Financial Crisis Affect the Southeast?

Defense Contractors in the Region Respond to Military Spending Cuts

Manufacturing Survey
Prices Soft, Production Outlook
Up in January

 ccording to the monthly survey of southeastern manufacturers conducted by the Federal Reserve Bank of Atlanta, activity indicators in January were mixed but remained generally soft compared to most of 1997. Indexes for output, shipments and the average workweek inched up from conditions in December, while the index for the number of employees rose moderately. The new orders and backlog orders indexes were essentially unchanged. The current prices received index moved up in January, while that for prices paid rebounded noticeably from a low level. While outlook activity indicators were mixed overall, the outlook index for production rebounded strongly in January. Both current and outlook indexes of new orders for exports showed little change in January.

The production index in January increased to plus 3.2 from a revised minus 1.2 in December. (December's figures incorporate new seasonal factors as well as late reports.) The proportion of respondents reporting higher production in January edged up to 31.7 percent from 29.5 percent in December, while the share reporting lower output declined to 28.5 percent from 30.7 percent the month before.

January manufacturing activity appears to be slowly recovering from a brief inventory adjustment, notably reflected in weak output in December and continued sluggish orders in January. The new orders index in January was soft but steady. The backlogs index remained mildly negative for the third consecutive month. Materials inventories were flat and negative for the second month in a row; the finished goods inventory index was unchanged. Manufacturers may be somewhat optimistic about near-term output improvement, as the index for the number of employees jumped from 3.8 in December to 9.9 in January and the average workweek index showed mild improvement.

Survey of Southeastern
Manufacturing Conditions

Survey of Southeastern Manufacturing Conditions
The current prices received index moved up to minus 2.9 in January from minus 6.9 the prior month. December's figure was the lowest level since December 1996. The current prices paid index rebounded to 7.7 in January from 1.0 in December.

The production outlook index rebounded in January to 46.1 from 36.5 in December, likely reflecting a view that current softness in output is temporary. January's figure was the highest since January 1993. The outlook index for new orders was little changed, remaining at the moderate levels seen over most of the past three years, while the backlogs index was down somewhat. The outlook index for backlogs had been at double-digit levels for the four previous months. The outlook shipments index was essentially unchanged, remaining at moderately high levels. The outlook indexes for inventory were mixed. The outlook materials inventories rose to positive territory for the first time since June 1996, while the outlook index for finished goods inventories edged down, remaining slightly negative. The outlook index for prices received for finished products was little changed in January at 15.4, while the prices paid outlook index rose to 26.5 from 21.0 in December. This rise likely reflects the view that the notable weakness in the current prices paid index is temporary.

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, January 1998
Seasonally Adjusted
January vs. December
Six Months from Now
Southeastern Plant Indicators Decrease No
Increase Diffusion
Decrease No
Increase Diffusion
Production 28.5 39.8 31.7 3.2 11.4 31.1 57.5 46.1
Volume of shipments 27.7 40.6 31.8 4.1 14.7 29.4 55.8 41.1
Volume of new orders 24.3 44.4 31.3 7.1 16.7 35.3 48.0 31.3
Backlog of orders 27.1 49.6 23.3 -3.9 19.4 52.9 27.7 8.4
Inventories: Materials 22.1 60.4 17.5 -4.7 20.5 58.3 21.2 0.7
Plant's finished goods
24.0 47.5 28.5 4.6 27.2 49.8 23.0 -4.3
Number of employees 7.4 75.2 17.3 9.9 14.9 58.7 26.4 11.5
Average employee workweek 18.6 62.8 18.7 0.1 15.3 64.6 20.2 4.9
Prices received for finished product2 15.4 72.1 12.5 -2.9 9.6 65.5 25.0 15.4
Prices paid for raw materials2 16.3 59.6 24.0 7.7 7.9 57.8 34.3 26.5
Capital expenditures -- -- -- -- 13.2 50.3 36.6 23.4
New orders for exports3 10.6 76.5 12.9 2.4 4.8 70.2 25.0 20.2
Supplier delivery time4 9.2 88.8 2.0 7.1 5.3 88.3 6.4 -1.1
Industry business activity, national 19.2 53.4 27.4 8.1 19.3 43.2 37.5 18.1
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 six-months-from-now series.
4 Not seasonally adjusted for the month-ago series and "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 105 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.