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PHILADELPHIA FED RELEASES BUSINESS OUTLOOK SURVEY FOR OCTOBER

 PHILADELPHIA, Oct. 21 /PRNewswire/ -- Manufacturing firms responding to the Business outlook Survey, compiled by the Federal Reserve Bank of Philadelphia Research Department, indicate increases in manufacturing activity this month.
 In conjunction with an improvement in general business activity, significant improvements are reported in new orders, shipments, and for the first time in five months, manufacturing employment. In addition to improvement in current manufacturing indicators, most of the future activity indexes also rose this month. Despite the increase in activity and improved optimism, there is no upward movement in industrial prices.
 CURRENT CONDITIONS
 Following four months of weak performance, the region's manufacturing sector is showing signs of strengthening. The survey's general activity diffusion index, which had remained negative in three of the previous four months, increased from a level of 0.7 in September to 15.1 this month (see chart). One-quarter of reporting firms indicate increases in new orders this month, and less than 10 percent report declines. As new orders have increased, so have unfilled orders. For the first time in six months, the percentage of firms reporting increases in unfilled orders outnumbers those reporting declines. Nearly 35 percent of the reporting institutions show increases in shipments this month, and the current shipments diffusion index, which now stands at 19.9, is at a level comparable to that earlier in the year. Even though shipments have increased, more firms report a longer average delivery time this month than report a shorter one.
 The apparent improvement in manufacturing activity has resulted in increases in employment at 22 percent of responding firms. The survey's current employment diffusion index, which had remained negative in the previous four months, increased from -7.7 in September to 10.7 this month (see Chart). The average workweek is, on balance, steady: 68 percent of manufacturers report no change in hours, and the percentage of firms increasing hours (13 percent) is nearly in balance with the percentage cutting hours (16 percent).
 PRICES
 Upward pressure on prices originating from increases in input prices appears to have moderated considerably in recent months. The largest number of firms (76 percent) reports no change in input prices this month, and the firms reporting input price increases (11 percent) are offset by those reporting price declines (11 percent). The survey's index for current prices paid, which now stands at -0.1, is the lowest reading of this index since last November.
 With regard to prices actually received for their manufactured goods, more than three times as many reporting firms (17 percent) indicate declines in prices as report price increases (5 percent). The diffusion index for prices received is now at its lowest level in the past 18 months. The apparent increases in demand for manufactured goods may be the reason for a somewhat higher percentage of firms expecting price increases in the next six months; about 28 percent of those polled expect price increases in the next six months.
 Nevertheless, 63 percent expect no change in their prices over the next six months, and 9 percent expect price reductions.
 OUTLOOK
 An improvement in current conditions is accompanied by an improved forecast for manufacturing over the next six months. The diffusion index for future economic activity increased from a level of 36.1 in September to 46.8 this month. Of those polled for the survey, 52 percent expect the overall level of business activity to increase in the next six months, compared with just 5 percent expecting a decline.
 Other indexes of future activity indicate that firms believe demand will rise above current levels and production increases will follow over the next six months. More than half of the firms expect increases in new orders and shipments, and, on balance, the level of unfilled orders is expected to increase.
 Reporting institutions are also more optimistic this month regarding their forecast for future employment. The survey's index of future employment increased from a level of -4.5 in September to 15.0 this month; this index had remained negative in five of the past seven months. Over one-quarter of the respondents report plans to hire additional workers over the next six months. In addition to hiring more workers, about one-third of those firms polled anticipate higher levels of capital spending over the same period.
 SUMMARY
 The region's manufacturing sector is showing signs of strengthening this month, and economic forecasts are rosier as well. When compared with the previous four months, this month's indicators of economic performance suggest increases in the demand for manufactured goods and higher production levels. Input prices remain steady, and a large proportion of surveyed firms report declining prices for their own manufactured goods.
 Firms also report increases in their work forces this month, and one-quarter of the firms expect to add workers in the next six months.
 BUSINESS OUTLOOK SURVEY: OCTOBER 1993
 Summary of Returns
 Indicator October vs. September
 Decr. No Incr. Diffusion
 Change Index
 GENERAL BUSINESS
 CONDITIONS
 What is your evaluation
 of the level of general
 business activity? 9.9 65.1 25.0 15.1
 COMPANY BUSINESS
 INDICATORS
 New orders 9.2 66.5 24.3 15.1
 Shipments 14.9 50.4 34.7 19.9
 Unfilled orders 12.1 72.6 14.5 2.4
 Delivery time 10.4 75.1 13.7 3.3
 Inventories 23.4 61.5 15.1 -8.3
 Prices paid 11.2 76.3 11.2 -0.1
 Prices received 16.7 77.9 5.2 -11.5
 Number of employees 11.2 66.9 21.9 10.7
 Average employee
 workweek 15.5 67.6 13.1 -2.4
 Capital expenditures --- --- --- ---
 Indicator Six Months from now vs. October
 Decr. No Incr. Diffusion
 Change Index
 GENERAL BUSINESS
 CONDITIONS
 What is your evaluation
 of the level of general
 business activity? 5.4 41.7 52.2 46.8
 COMPANY BUSINESS
 INDICATORS
 New orders 7.1 41.2 51.7 44.7
 Shipments 6.2 41.5 52.3 46.2
 Unfilled orders 3.5 63.4 31.6 28.1
 Delivery time 13.5 70.9 13.0 -0.6
 Inventories 29.0 47.8 23.2 -5.8
 Prices paid 3.2 47.5 48.3 45.1
 Prices received 9.0 62.7 28.3 19.4
 Number of employees 11.3 62.5 26.2 15.0
 Average employee
 workweek 4.9 65.5 26.6 21.7
 Capital expenditures 4.7 51.8 31.8 27.1
 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- 10/21/93
 /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-MM -- PH003 -- 5043 10/21/93 09:59 EDT
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Date:Oct 21, 1993
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