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FEDERAL RESERVE BANK OF PHILADELPHIA RELEASES DECEMBER BUSINESS OUTLOOK SURVEY

 FEDERAL RESERVE BANK OF PHILADELPHIA
 RELEASES DECEMBER BUSINESS OUTLOOK SURVEY
 PHILADELPHIA, Dec. 20 /PRNewswire/ -- According to this month's Business Outlook Survey, compiled by the Federal Reserve Bank of Philadelphia Research Department, business conditions in the manufacturing sector are deteriorating sharply.
 The survey's broadest measure of overall activity shows that, despite gains made during the spring and summer, recent declines have returned the index to levels prevailing at the beginning of 1991.
 CURRENT CONDITIONS
 The overall index of manufacturing activity stands at -22 in December. Almost 42 percent of manufacturers surveyed in December report declines and only 19 percent indicate increases (see chart). After reaching its peak of 26.1 in July, the index has now declined for five consecutive months and has been negative for two months. Its current level is the lowest since February 1991.
 Manufacturing employment continues to fall, according to surveyed respondents. Twenty-nine percent of survey respondents report reductions in payrolls and only 7 percent are adding workers, resulting in a diffusion index of -22. According to the survey, in the last two years the number of manufacturers reporting declining payrolls exceeded those reporting increases in all but two months (see chart).
 The reported decline in manufacturing is reflected also in a parallel decline in shipments and new orders. Shipments are on the decline at 28 percent of surveyed firms and rising at only 20 percent. Thirty percent of respondents report that unfilled orders are falling, while only 10 percent are seeing increases.
 PRICES
 Industrial prices are relatively stable, according to survey participants. About 78 percent report steady prices for the goods they produce, and the percentage of firms indicating higher prices nearly matches the percentage indicating lower prices. Input prices remain generally stable, as 80 percent of respondents indicate no change from the previous month. Seventeen percent report rising input prices, compared to just 2 percent indicating declining input prices.
 On balance, survey respondents expect prices to rise over the next six month for both manufacturing inputs and their own manufactured goods. Nevertheless, expectations of rising prices are not as common among survey participants this month as they were on average over the past six months.
 OUTLOOK
 Although the diffusion index of current business activity has declined precipitously in the last four months, surveyed firms continue to believe that business conditions will improve by mid-1992. Of those polled in December, about 68 percent expect improved conditions by midyear. This percentage has decreased only slightly over the past four months.
 The percentage of firms expecting declining employment levels in the next six months increased somewhat in December. Still, almost 32 percent expect employment increases over current levels, compared to 18 percent expecting decreases.
 SUMMARY
 The region's manufacturing sector has weakened in recent months to the recessionary level prevailing at the beginning of the year. Employment, shipments, and new orders are declining. Prices remain generally stable, according to those surveyed. Survey participants are forecasting improvement in manufacturing business by midyear.
 BUSINESS OUTLOOK SURVEY: DECEMBER 1991
 Indicator December vs. November
 Decr. No Incr. Diffusion
 Change Index
 GENERAL BUSINESS
 CONDITIONS
 What is your evaluation
 of level of general
 business activity? 41.7 38.9 19.3 -22.4
 COMPANY BUSINESS
 INDICATORS
 New orders 37.5 39.7 20.9 -16.6
 Shipments 28.3 48.3 19.6 -8.8
 Unfilled orders 30.1 53.3 10.1 -20.0
 Delivery time 9.1 83.5 6.3 -2.8
 Inventories 38.0 47.9 12.2 -25.8
 Prices paid 2.4 80.1 17.1 14.7
 Prices received 11.6 77.6 10.7 -0.9
 Number of employees 29.4 63.5 7.1 -22.4
 Average employee
 workweek 30.7 64.4 4.9 -25.9
 Capital expenditures --- --- --- ---
 Indicator 6 Months from now vs. December
 Decr. No Incr. Diffusion
 Change Index
 GENERAL BUSINESS
 CONDITIONS
 What is your evaluation
 of level of general
 business activity? 4.3 27.0 67.6 63.3
 COMPANY BUSINESS
 INDICATORS
 New orders 8.7 28.7 61.9 53.2
 Shipments 7.4 27.3 64.3 56.9
 Unfilled orders 11.1 51.2 35.1 23.9
 Delivery time 16.9 72.3 8.8 -8.2
 Inventories 31.8 44.5 22.7 -9.2
 Prices paid 4.5 50.2 40.4 35.8
 Prices received 6.3 64.6 25.2 18.9
 Number of employees 18.1 48.9 32.0 14.0
 Average employee
 workweek 13.4 57.2 29.4 15.9
 Capital expenditures 19.6 30.1 29.6 10.0
 Notes:
 1. Items may not add up to 100 percent because of omission by respondents.
 2. All data seasonally adjusted.
 3. Diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease.
 /delval/
 -0- 12/20/91
 /CONTACT: Rossana Mancini of the Federal Reserve Bank of Philadelphia, 215-574-3810/ CO: Federal Reserve Bank of Philadelphia ST: Pennsylvania IN: FIN SU: ECO


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Date:Dec 20, 1991
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