Southeast survey suggests economy may be slowing, inflation

ATLANTA -- A monthly survey of manufacturers based in Southeast states released Monday suggests the U.S. economy may be starting to throttle back -- and inflation may be picking up.

Federal Reserve Bank of Atlanta figures show that companies based in its district -- in Alabama, Florida, Georgia, and parts of Louisiana, Mississippi and Tennessee -- are less optimistic about their prospects over the next six months.

The number of respondents expecting higher output over the next six months fell to 46.8 percent from 51 percent in February and 54 percent in January, the Atlanta Fed said. In addition, the volume of new orders at Southeastern factories fell in March as inventories of finished goods rose. Those findings track with expectations that "the second quarter is going to come in weaker because a good deal of the strength was pulled into the first quarter" by unusually warm weather, said Mark Vitner, an economist at First Union Corp. in Charlotte, N.C. Overall, the Atlanta Fed's national business activity index rose to a seasonally adjusted 10.3 last month. That's up from a revised 7.1 in February but still short of January's reading of 13.8. A positive index means more of the region's manufacturers reported an increase in business than reported a decline. The report "depicts an economy continuing to expand," although the data "indicate a deceleration in activity," said Marilyn Schaja, an economist with Donaldson, Lufkin & Jenrette in New York. The Atlanta Fed report also suggested inflation in the region could rise in the months ahead, even though prices aren't rising rapidly at the moment. While the raw materials price index, which measures what producers pay their suppliers, fell to 15.2 in March from 17.7 the previous month, the survey showed a big increase in the number of Southeastern manufacturers who expect inflation to be a problem six months from now. The index of price expectations jumped to 39.3 from 27.4. The finished goods price index, meantime, increased to 2.9 from 0.9, suggesting some of those manufacturers are already passing on price increases to consumers.

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