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PHILADELPHIA FED RELEASES FEBRUARY BUSINESS OUTLOOK SURVEY

 PHILADELPHIA, Feb. 18 /PRNewswire/ -- The region's manufacturing sector is continuing to expand, according to this month's Business Outlook Survey, compiled by the Federal Reserve Bank of Philadelphia Research Department.
 The survey's broadest measure of economic performance, the diffusion index of general activity, remains near the high levels recorded during the previous two months. Both shipments and new orders show continued strength this month, but indicators of current manufacturing employment remain virtually unchanged. Prices of finished manufacturing goods are reported to be steady, although a larger percentage of firms report higher prices for inputs this month.
 Current Conditions
 The general activity diffusion index, which now stands at 38.8, is virtually unchanged from last month. The index, which has remained positive over the past year, has remained at a relatively high level for the past three months, indicating a significant improvement in manufacturing activity. About 48 percent of the manufacturers polled report an increase in activity from the previous month, compared with just 9 percent reporting a decline.
 Individual indicators highlight a manufacturing sector that has gained strength. Nearly 49 percent of the surveyed firms report increases in shipments this month, compared with about 13 percent reporting declines. New-order statistics show similar strength: 49 percent of the firms report increases and 19 percent report declines. Diffusion indexes for both shipments and new orders have remained at relatively high levels for the past three months and are near their highest levels in more than four years.
 The manufacturing establishments polled this month report unfilled orders are increasing. The unfilled orders diffusion index has been increasing over the past three months and has now been positive for two consecutive months. The diffusion index for current inventories, after declining precipitously over the past two months, increased from a level of -29.6 in January to -8.9, suggesting inventory levels have been stabilizing. About 59 percent of the manufacturers report no change in inventory levels this month, and the percentage of firms reporting declines (25 percent) narrowly outnumbers the percentage reporting increases (16 percent).
 Current manufacturing employment statistics show little change from January. About 67 percent of the firms polled report no change in employment over January, and the percentage of firms reporting increases in their work-force (19 percent) only narrowly exceeds the percentage with work-force reductions (14 percent). The average workweek diffusion index remained positive, declining from a level of 11.9 in January to 6.7 this month.
 Prices
 Surveyed manufacturers report higher prices for purchased inputs this month. The diffusion index for prices paid by manufacturers increased from a level of 8.6 in January to 25.2 this month (see chart), representing the highest level for this index since 1990. Although 74 percent of the surveyed firms report no change in input prices, about 25 percent of the firms reported higher prices this month than in January and no firms reported input price reductions. Furthermore, nearly 48 percent of the firms polled expect input price increases over the next six months.
 Despite reported increases in the prices of raw materials and other purchased inputs, manufactured-goods prices remain, on balance, steady. Eighty-three percent of the firms report no change in their prices, and the percentage of firms reporting price increases (10 percent) only narrowly exceeds the percentage reporting price reductions (7 percent).
 A growing number of firms have reported in recent months that they expect manufactured-goods prices to increase over the next six months. The future-prices-received diffusion index increased from a level of 25.8 in January to 36 this month. About 36 percent of those polled expect price increases over the next six months, compared with almost no reporters expecting price reductions.
 Outlook
 The February survey reflects continued optimism among the region's manufacturers, and most future indicators remain near the levels recorded in recent months. The overall diffusion index for future economic activity increased from a level of 65.1 to 70.7 this month, reflecting the expectation of 73 percent of respondents that current conditions will improve over the next six months.
 Other indicators of future economic activity reflect manufacturers' plans to boost production in step with anticipated increases in demand. New orders and shipments are expected to increase from current levels at about 62 percent of the firms responding to the survey. Nearly 26 percent of the firms expect employment levels to rise, compared with 14 percent of the firms expecting lower employment levels. On balance, the average workweek is expected to increase for nearly 30 percent of the firms reporting. Nevertheless, unfilled orders will increase over the next six months and delivery times will lengthen, according to those firms surveyed.
 Summary
 Results from the February Business Outlook Survey indicate continued improvements in the manufacturing sector. In particular, individual indicators for shipments and new orders show considerable strength. Although prices of purchased inputs are reported to be higher this month, current manufactured-goods prices remain steady. With regard to the next six months, survey results reflect continued optimism that the recent improvement in the manufacturing sector will continue.
 -----
 The BOS (Business Outlook Survey) is a monthly manufacturing survey compiled by the Philadelphia Fed. 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, there are about 500 companies in the District of this size and approximately one-third participate in the survey.
 BUSINESS OUTLOOK SURVEY: FEBRUARY 1993
 Summary of Returns
 Indicator February vs. January
 Decrease No Increase Diffusion
 Change Index
 GENERAL BUSINESS CONDITIONS:
 What is your evaluation
 of the level of general
 business activity? 8.7 37.8 47.5 38.8
 COMPANY BUSINESS INDICATORS:
 New orders 18.8 31.9 49.3 30.5
 Shipments 12.7 35.7 48.5 35.8
 Unfilled orders 11.6 52.6 32.3 20.7
 Delivery time 6.6 75.1 16.7 10.1
 Inventories 24.5 58.9 15.7 -8.9
 Prices paid 0.0 74.4 25.5 25.2
 Prices received 6.6 83.0 10.4 3.7
 Number of employees 13.6 67.3 19.1 5.5
 Average employee
 workweek 11.2 66.8 17.9 6.7
 Capital expenditures --- --- --- ---
 Indicator Six Months from now vs. February
 Decrease No Increase Diffusion
 Change Index
 GENERAL BUSINESS CONDITIONS:
 What is your evaluation
 of the level of general
 business activity? 1.8 20.6 72.5 70.7
 COMPANY BUSINESS INDICATORS:
 New orders 4.4 28.0 61.9 57.5
 Shipments 3.3 31.1 61.1 57.8
 Unfilled orders 14.7 52.6 29.7 15.0
 Delivery time 8.7 66.9 20.6 11.9
 Inventories 29.4 44.5 25.0 -4.4
 Prices paid 0.0 52.5 47.5 47.5
 Prices received 0.2 62.8 36.2 36.0
 Number of employees 14.0 58.0 25.8 11.8
 Average employee
 workweek 3.1 62.7 30.3 27.2
 Capital expenditures 8.9 40.9 30.3 21.4
 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- 2/18/93
 /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

JS-LJ -- PH010 -- 7756 02/18/93 10:00 EST
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