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PHILADELPHIA FED RELEASES BUSINESS OUTLOOK SURVEY FOR JULY

 PHILADELPHIA, July 15 /PRNewswire/ -- Manufacturers responding to the July Business Outlook Survey (BOS), compiled by the Federal Reserve Bank of Philadelphia Research Department, report weakening activity again this month.
 For the second consecutive month, the survey's main index of overall activity is negative. Those surveyed report manufacturing shipments and new orders are virtually flat compared with the previous month. The manufacturers also indicate continued declines in manufacturing employment and the average workweek for the month. While respondents expect some improvement in the next six months, most future indicators remain below levels recorded earlier in the year.
 CURRENT CONDITIONS
 The survey's general activity diffusion index declined from a level of -6.5 to -10.3 this month. About 58 percent of those manufacturers polled indicate no change in activity from the previous month, but for the second consecutive month the proportion indicating that activity declined (23 percent) exceeded the proportion indicating an increase (13 percent). The survey's other current indicators suggest little growth in the manufacturing sector. Both the new orders and shipments diffusion index remain near zero in July (see chart). Also indicative of weakness, both unfilled orders and delivery time indexes have remained negative now for three consecutive months.
 Surveyed firms report continued employment contraction this month. About 74 percent of the manufacturers report no change in employment, but the percentage of firms reporting employment declines (22 percent) significantly outnumbers the percentage reporting increases (4 percent). The current employment diffusion index, which now stands at -17.7, is at its lowest level in 18 months. Firms also report that the average workweek is declining this month.
 PRICES
 Manufacturers report that prices received for their products remain steady despite increases in prices paid for inputs. The diffusion index for current prices received, which now stands at 1.2, increased slightly from a reading of -1.0 in June. Nearly 75 percent of those firms surveyed report no change in their prices, while the percentage reporting decreases (12 percent) nearly offsets those reporting increases (13 percent). Sixty-nine percent of those polled report no change in the prices of their inputs but the percentage of firms reporting increases (25 percent) is significantly higher than the percentage reporting reductions (5 percent).
 Recent slowing of activity has been associated with moderating expectations of future price increases. Although the diffusion index for future prices received increased from 11.1 to 16.3 this month, the level of the index over the past two months is lower than the previous six months (the average level of the index from December through May was 28.7).
 OUTLOOK
 Looking ahead six months, only 15 percent of those surveyed expect a deterioration in activity from current levels and 47 percent expect improvement. The general activity index for future activity increased from a level of 20.2 in June to 32.1 this month. Future indicators for new orders and shipments showed a similar rise for the month. While respondents do expect improvement in the next six months, these indicators are well below the levels recorded earlier in the year.
 With regard to their hiring plans, the proportion of firms planning to make cuts (25 percent) outnumbers those planning to add workers (14 percent). The future employment diffusion index, which now stands at -10.9, has now been negative in four of the last five months, following a 24-month period in which the index remained positive. On balance, firms are expecting a decline in the average workweek over the next six months.
 The recent weakening in manufacturing activity and the relatively modest outlook has apparently affected plans for capital expenditures. The future capital expenditures index, which now has a reading of -9.8, is the first negative value of the index in over two years and is near the lowest recorded over the 25-year history of the series.
 SUMMARY
 The manufacturers polled for the July Business Outlook Survey report deteriorating activity and indicate new orders and shipments are level with the previous month. Firms continue to make reductions in the number of production workers and also report declines in the average workweek. Although only about 15 percent of those polled expect worsening conditions over the next six months, the recent weakening in demand is negatively influencing plans for employment and capital expenditures.
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 The BOS is a monthly manufacturing survey compiled by the Federal Reserve Bank of Philadelphia's Economic Research Department. All of the manufacturers are located within the Third Federal Reserve District which includes the eastern two-thirds of Pennsylvania, southern New Jersey, including Trenton, and the whole state of Delaware. The reporting panel is comprised of manufacturing establishments of 350 employees or more. Currently, about 150 companies are surveyed each month.
 BUSINESS OUTLOOK SURVEY: JULY 1993
 Indicator July vs. June
 Decr. No Incr. Diffusion
 Change Index
 GENERAL BUSINESS CONDITIONS
 What is your evaluation
 of the level of general
 business activity? 23.3 58.1 13.0 -10.3
 COMPANY BUSINESS
 INDICATORS
 New orders 18.6 64.7 16.7 -2.0
 Shipments 24.9 47.6 27.5 2.6
 Unfilled orders 21.7 60.6 17.7 -4.0
 Delivery time 18.5 70.8 8.1 -10.4
 Inventories 24.6 52.2 23.2 -1.4
 Prices paid 4.9 69.2 25.2 20.3
 Prices received 11.7 75.4 12.9 1.2
 Number of employees 21.9 73.5 4.2 -17.7
 Average employee
 workweek 20.1 70.0 9.1 -11.1
 Capital expenditures --- --- --- ---
 Indicator Six Months from now vs. July
 Decr. No Incr. Diffusion
 Change Index
 GENERAL BUSINESS CONDITIONS
 What is your evaluation
 of the level of general
 business activity? 14.6 35.8 46.8 32.1
 COMPANY BUSINESS
 INDICATORS
 New orders 15.4 39.0 44.1 28.7
 Shipments 11.7 38.8 48.6 36.9
 Unfilled orders 14.5 67.2 15.6 1.1
 Delivery time 15.8 73.9 7.7 -8.1
 Inventories 31.9 48.8 16.4 -15.5
 Prices paid 4.0 49.0 42.7 38.7
 Prices received 10.1 60.9 26.3 16.3
 Number of employees 24.7 59.2 13.8 -10.9
 Average employee
 workweek 17.1 65.1 11.6 -5.6
 Capital expenditures 19.8 45.8 10.0 -9.8
 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- 7/15/93
 /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

MK-CC -- PH004 -- 1834 07/15/93 10:00 EDT
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Date:Jul 15, 1993
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