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PHILADELPHIA FED RELEASES NOVEMBER BUSINESS OUTLOOK SURVEY

 PHILADELPHIA, Nov. 18 /PRNewswire/ -- The region's manufacturing sector continued to improve, according to results from the November Business Outlook Survey. Following three consecutive months in the negative range, the survey's broadest measure of economic performance turned positive in September and has increased steadily for the past two months. The manufacturing firms surveyed report increases in both shipments and new orders. Overall manufacturing employment is reported steady, and firms indicate stability in the price of both inputs and finished manufactured goods. Although most of the survey's indicators of future economic activity declined this month, forecasts remain generally optimistic. This month's indicators for future prices also suggest that expectations of price increases moderated.
 Current Conditions
 The survey's broadest measure of manufacturing activity, the general activity diffusion index, increased from 15.1 in October to 22.4 this month. About 31 percent of those responding to the survey report increases in activity, and 8 percent report declines. The diffusion index for new orders also increased from 15.1 in October to 24.8; nearly one-third of the reporting firms registered increases in new orders this month. The current shipment index and the unfilled orders index, at 7.7 and 3.5, respectively, remain positive. Delivery times are reported steady at nearly 77 percent of the reporting firms: 12 percent indicate a decline in delivery time, and 10 percent report an increase.
 Following a one-month surge above zero last month, the survey's diffusion index for current employment fell back to -3.1 this month; the index has remained below zero in five of the last six months. About 79 percent of the manufacturers report no change in employment this month, compared with 9 percent reporting increases and 12 percent reporting declines. On balance, the average workweek edged lower this month; the diffusion index now registers a reading of -5.7.
 Prices
 Manufacturing firms report near steady prices for purchased inputs in November. About 75 percent of those polled report no change in input prices, and firms reporting increases (15 percent) only narrowly exceed those reporting declines (10 percent). The diffusion index for current prices paid, which dipped below zero in October (-0.1), increased marginally to 5.4 this month.
 The current diffusion index for prices received, which has remained below zero for five of the last six months, increased from -11.5 in October to -4.1 this month. Nevertheless, a significant percentage of manufacturers (12 percent) report declines in manufacturing prices this month and continue to outnumber those reporting increases (8 percent).
 The survey's indicators for future manufacturing prices declined this month, suggesting that price expectations have moderated. The current readings of both the future prices paid and prices received diffusion indexes are now near their lowest levels in three years (see Chart). Although the percentage of firms expecting price increases for their own manufactured goods (20 percent) outnumbers the percentage


expecting price reductions (12 percent), the diffusion index, at 8.1, is at its lowest level in three and one-half years.
 Outlook
 Most of the survey's future economic indicators declined modestly this month. Looking ahead six months, a majority of respondents (55 percent) forecast an increase in general activity for their businesses. The future general activity index, which registered 46.8 in October, declined to 40.3 this month. Although the index has been trending up over the past few months, it remains below levels recorded over most of the previous year. More than one-half of the manufacturers expect increases in new orders and shipments over the next six months (60 percent and 55 percent, respectively). On balance, the firms polled expect an increase in unfilled orders but a shortening in average delivery time.
 With respect to their hiring plans, 24 percent of the polled firms expect to add workers in the next six months, but 17 percent expect to make cuts. The index for future employment, which had been trending up in the past few months, dropped from 15.0 in October to 6.7 this month. The future employment index, however, remains above the levels recorded over the previous six months. With regard to their plans for capital expenditures, firms appear more optimistic. About 43 percent of the firms report plans to increase capital spending in the next six months, with only 3 percent expecting a decline.
 Summary
 The recent growth in manufacturing appears to be continuing, according to the November Business Outlook Survey. Nearly one-third of the firms polled report increases in new orders this month and three- fifths of the firms expect increases over the next six months. Polled firms report steady employment levels this month and continued steady prices. Although most future indicators show a modest decline this month, manufacturers have a generally positive outlook for the next six months.
 BUSINESS OUTLOOK SURVEY: November 1993
 Indicator November vs. October
 Decr. No Incr. Diffusion
 Change Index
 GENERAL BUSINESS
 CONDITIONS
 What is your evaluation
 of the level of general
 business activity? 8.2 60.1 30.6 22.4
 COMPANY BUSINESS
 INDICATORS
 New orders 7.2 60.0 31.9 24.8
 Shipments 15.1 62.2 22.7 7.7
 Unfilled orders 8.2 75.0 11.7 3.5
 Delivery time 11.8 76.5 10.3 -1.5
 Inventories 18.3 54.1 27.4 9.1
 Prices paid 9.8 74.9 15.3 5.4
 Prices received 12.3 78.2 8.2 -4.1
 Number of employees 11.8 79.2 8.7 -3.1
 Average employee
 workweek 11.6 79.2 5.9 -5.7
 Capital expenditures --- --- --- ---
 Indicator Six Months from now vs. November
 Decr. No Incr. Diffusion
 Change Index
 GENERAL BUSINESS
 CONDITIONS
 What is your evaluation
 of the level of general
 business activity? 14.3 29.0 54.6 40.3
 COMPANY BUSINESS
 INDICATORS
 New orders 11.2 28.3 60.2 49.0
 Shipments 10.5 34.7 54.8 44.3
 Unfilled orders 14.7 62.9 20.3 5.6
 Delivery time 18.8 72.5 6.9 -11.8
 Inventories 26.5 56.5 15.4 -11.1
 Prices paid 6.2 64.6 27.6 21.4
 Prices received 11.5 68.9 19.6 8.1
 Number of employees 17.3 57.5 24.0 6.7
 Average employee
 workweek 11.5 59.9 28.6 17.1
 Capital expenditures 3.0 46.7 43.4 40.4
 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- 11/18/93
 /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

MJ-LJ -- PH004 -- 5917 11/18/93 10:00 EST
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Date:Nov 18, 1993
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