February 1997 (January data)

Embargoed until 10 a.m. Feb. 12, 1997


According to the monthly survey conducted by the Federal Reserve Bank of Atlanta, the proportion of southeastern manufacturers reporting gains in production rebounded sharply in January after a decline in December. Forward momentum remains moderate with reported increases of new orders and backlogs up sharply and inventories lean. Additionally, expectations indexes remain generally healthy.

In January, the proportion of survey respondents reporting increased production rose to 40 percent, after edging down to 29 percent in December, and the share reporting a decline in production dropped 14 percentage points to 20 percent. As a result, the diffusion index for production rose sharply to 21 from minus 5 in December. Significant improvement was also reported in shipments, new orders, backlogs and the workweek.

Orders, inventories and employment indicators suggest that current momentum remains moderate. The new orders index jumped to 18 in January -- the highest level in 28 months -- but this followed minus 13 -- the lowest level since February 1996. There are few indications of inventory problems as both finished goods and materials inventories indexes remain in negative territory, indicating that the orders improvement likely will carry over to production gains rather than to inventory reductions.

Labor markets trends are little changed over time. The number of employees index slipped in January but remained slightly positive, and the average employee workweek index rose sharply. The average employee workweek index swung from minus 12 in December to plus 4 in January. Despite the improvement, the workweek figures are soft, having risen to only marginally above zero.

No significant, ongoing signs of inflation appear for manufacturers in the Southeast. Current price indexes have risen -- but from low levels. The index for prices received increased to minus 2 in January from minus 16 in December -- which was only marginally above the series low of minus 19 set in January 1992. Over 80 percent of respondents reported no change in prices received for January. The prices paid diffusion index also firmed -- rising to 16 in January from 8 in December. This is in the lower part of the series' historical range. Additionally, the supplier delivery index was little changed in January, remaining near the zero mark where it has been since early 1995. Only 6 percent of respondents noted any slowing in delivery time while 90 percent indicated no change.

Outlook indexes declined somewhat in January but remained around their averages for the past 18 months. The higher level of January current activity raised the starting point level for six-month expectations. The production outlook declined to 35 in January from 43 in December. Just over half of the respondents expect higher output in coming months. Shipments and new orders expectations indexes also declined from December's above-trend levels. The outlook index for employment declined from 9 in December to 5 in January. This series has been mildly positive for three consecutive months -- an event not seen since late 1994.

More manufacturers reporting higher current prices may not only be moderate but also temporary as outlook price indexes declined. The expected materials prices index slipped to 28 in January from 37 the month before, and the index for expected finished goods prices dropped back to 10 in January after jumping to 19 in December. Each of these indexes is low in its historical range.

NOTE: The Atlanta Fed's survey covers the Sixth Federal Reserve District, which includes Alabama, Florida and Georgia and portions of Louisiana, Mississippi and Tennessee. The plants surveyed represent a cross-section of industries in the region. For background on the Survey of Southeastern Manufacturing Conditions, see the article by R. Mark Rogers, "Tracking Manufacturing: The Survey of Southeastern Manufacturing Conditions," in the September/October 1992 issue of the Federal Reserve Bank of Atlanta's Economic Review. For reprints and historical data, see http://www.frbatlanta.org on the World-Wide Web or visit the U.S. Commerce Department's Economic Bulletin Board.

Summary of Southeastern Manufacturing Conditions: January 1997