Regional Update (April-June 1998)

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

Cover Story - Emerging Venture Capital Investment in the Southeast

The Productivity Puzzle: Increasing Output in Tight Job Market

Manufacturing Survey
Production Up, Outlook Mixed
But Healthy in May

A ccording to the monthly survey of southeastern manufacturers conducted by the Federal Reserve Bank of Atlanta, the May index for current output rose moderately from the April level while new orders and shipments declined. Inventory indexes were higher in May, notably for finished goods. Employment indicators were up slightly in May, continuing at their highest levels since 1994. For current prices, the prices paid index was flat and weak while the prices received index was up modestly. Supplier delivery time slipped. Indicators of future activity were mixed in direction but generally at healthy levels.

The production index in May rose to 25.0 from a revised 23.5 in April. May's output index is at the highest level in almost four years. The output index has been at moderately strong levels since February 1998 and has averaged above levels not generally seen since early 1994. The proportion of respondents reporting higher production in May edged down to 44.1 from 46.2 in April, but the share of respondents reporting declines fell to 19.2 in May from 22.7 percent the prior month.

Summary of Southeastern Manufacturing Conditions, May 1998
Seasonally Adjusted
May vs. April
Six Months from May
Southeastern Plant Indicators Decrease No
Increase Diffusion
Decrease No
Increase Diffusion
Production 19.2 36.8 44.1 25.0 14.0 38.2 47.8 33.8
Volume of shipments 24.6 32.7 42.7 18.2 14.3 36.2 49.5 35.2
Volume of new orders 20.7 42.3 37.1 16.4 11.6 43.2 45.2 33.6
Backlog of orders 23.7 50.7 25.7 2.0 12.7 60.0 27.3 14.7
14.7 56.8 28.4 13.7 23.8 57.3 18.8 -5.0
Plant's finished goods
15.9 48.3 35.8 19.8 22.5 57.6 20.0 -2.5
Number of employees 9.5 67.1 23.3 13.8 16.1 57.3 26.7 10.7
Average employee workweek 13.0 62.7 24.3 11.3 15.4 65.3 19.4 4.0
Prices received for finished product2 11.0 74.3 14.7 3.7 12.2 60.3 27.6 15.4
Prices paid for raw materials2 16.5 67.9 15.6 -0.9 11.6 60.0 28.4 16.8
Capital expenditures 11.2 52.3 36.4 25.2
New orders for exports3 10.5 73.3 16.3 5.8 8.9 70.0 21.1 12.2
Supplier delivery time4 6.6 87.7 5.7 0.9 5.7 85.7 8.6 -2.9
Industry business activity, national 15.5 50.3 34.2 18.6 15.1 39.7 45.3 30.2
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 111 respondents. Figures may not sum exactly to 100 because of rounding. For background on the Survey of Southeastern Manufacturing Conditions, see "Southeastern Manufacturing Survey Reveals Regional Economic Trends" in the Federal Reserve Bank of Atlanta's Regional Update, Volume 6, Number 2-3, 1993. Click here for historical data.

There are signs that the recent forward momentum in southeastern manufacturing may be slowing. The new orders index slipped for the second consecutive month to 16.4 in May from 18.2 in April. The index for new export orders also slipped. The shipments index declined after two relatively strong months in March and April. On net, the backlog index was up modestly in May but was still soft. Both current inventory indexes were up significantly in May, each setting new series highs. However, inventories had been atypically weak in previous months.

Survey of Southeastern
Manufacturing Conditions
The number of employees index suggests southeastern manufacturers have confidence in overall prospects. The current number of employees index rose for the second consecutive month and to its highest level in the series history. The percentage noting an increase in the number of employees rose to 23.3 percent from 22.0 percent in April while those reporting declines stood at 9.5 percent, little changed from 9.6 percent in April. The average workweek index rose for the fifth consecutive month and to its highest level since August 1994.

The current prices received index rebounded to plus 3.7 from minus 0.9 in April but remained soft. The current prices paid index was weak and unchanged at minus 0.9 in May. The supplier delivery time index fell for the second consecutive month and was at its lowest level since December 1996.

Outlook indexes gave mixed signals. The outlook shipments index was steady. The new orders and backlog outlook indexes rebounded from a dip in April. All year they have been above levels generally seen in 1997. Despite the gains in current inventory indexes, outlook inventories also moved up modestly, remaining near historical averages. However, the outlook index for new export orders fell in May to its lowest level since September 1996.

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