Regional Update (April-June 1996)

Index The state of the states Southeastern manufacturing survey Views from the region Southeastern economic indicators

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Manufacturing Survey
Production Remained Weak in First Quarter

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

Overall, production remained weak in the first quarter of 1996. For the second quarter in a row, the production index was in negative territory. About 27 percent of the southeastern manufacturers surveyed reported that production increases in the first quarter changed little from the 26 percent increase in the fourth quarter of 1995. The share reporting a decline in production was 31 percent, measured against 33 percent in the fourth quarter. The diffusion index improved to -4.0 from -7.0 in the fourth quarter. Indexes for new orders, backlogs, number of employees, and average workweek moved similarly to the production index. Indexes for materials and for finished product inventories increased in the first quarter.

Employment indicators remained in negative territory during the first quarter despite improvement. The number-of-employees index reached -2.5 after a recent low of -11.4 in the fourth quarter of 1995. However, most respondents continue to report no change in length of workweek and number of employees.

The majority of respondents continued to report no change in both prices received for finished goods and prices paid for raw materials, although price indexes declined. The prices-received index fell to -14.1, its lowest level since January 1992, when it stood at -18.7. The prices-paid index reached negative territory for the first time at -1.5 in the first quarter, compared with 12.1 in the fourth quarter.

Outlook

Expectations for future manufacturing activity rebounded slightly in the first quarter. Fifty-two percent of manufacturers surveyed anticipate an increase in production activity in the coming months, compared with 50 percent in the fourth quarter, while 19 percent in both the first and fourth quarters expect a decline. As a result, the production index increased from 31.1 in the fourth quarter to 33.4 in the first quarter. Expectations for shipments also rebounded while new orders and backlogs were stable from quarter to quarter.

Both employment indexes—number of employees and average workweek—declined as the number-of-employees index fell into the negative range.

The outlook indexes for prices received and for finished goods prices fell to series lows in the first quarter.

Summary of Southeastern Manufacturing Conditions, March 1996
Seasonally Adjusted
March vs. February
(Percent)
Six Months from March
(Percent)
Southeastern Plant Indicators Decrease No
Change
Increase Diffusion
Index1
Decrease No
Change
Increase Diffusion
Index1
Production 30.8 42.4 26.8 -4.0 18.8 29.0 52.2 33.4
Volume of shipments 28.9 40.1 31.0 2.1 20.1 24.5 55.4 35.3
Volume of new orders 32.0 40.7 27.3 -4.8 19.2 33.4 47.4 28.2
Backlog of orders 32.1 46.7 21.3 -10.8 21.2 48.3 30.5 9.3
Inventories:
Materials
23.2 49.9 26.9 3.7 27.2 55.8 17.0 -10.2
Finished
goods
28.0 40.4 31.6 3.6 35.3 44.7 19.9 -15.4
Number of employees 20.3 61.9 17.8 -2.5 24.6 56.5 18.9 -5.7
Average employee workweek 17.6 66.9 15.4 -2.2 16.1 65.5 18.4 2.3
Prices received for finished product2 20.0 74.1 5.9 -14.1 20.1 53.6 26.3 6.2
Prices paid for raw materials 16.5 68.5 15.0 -1.5 18.6 49.2 32.2 13.6
Capital expenditures -- -- -- -- 16.8 52.7 30.6 13.8
New orders for exports3 14.2 80.3 5.5 -8.6 10.8 63.1 26.1 15.3
Supplier delivery time4 7.9 84.3 7.9 0.0 8.8 78.8 13.8 -5.0
Industry business activity, national 30.0 46.0 24.0 -6.1 21.9 30.3 47.9 26.0
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 135 respondents. Figures may not sum exactly to 100 because of rounding. Revised March and April 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.

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