The November Business Outlook Survey by the Philadelphia Federal Reserve Bank painted a somewhat rosier short-term picture than the survey for last month. October's Current General Activity Index decline from 25.5 to 7.9 was reversed in November by a jump back up to the 21.5 level. This was accompanied by increases in the Current Shipments Index and the Current New Orders Index.

More firms reported declines than advances in employment and the average workweek.

The Current Prices Paid Index -- an inflation indicator -- declined from 12.3 to 3.0. This was the lowest reading of this index in almost four years. This index has declined in 11 out of the last 12 months. Prices received for final manufactured goods held steady. 81% of the survey respondents reported no change in the prices received for their goods. Among the remaining firms, price reductions held a slight edge over increases.

The survey respondents look forward to still lower prices during the next six months. The indexes for future prices paid and prices received both declined and are near 28-year lows.

The survey's Future General Activity Index -- an indicator of expections for the next six months -- declined from 29.4 to 15.4. This was the lowest reading in the past 6 months. New orders, shipments and inventories are expected to decline, and delivery times are expected to shorten. Employment levels are expected to be constant.

Summing up: Despite short-term improvements in general economic activity, the survey respondents predicted that growth would be slower during the next six months.

The markets responded predictably to the Philly report. The 30-year T-bond rose 12/32 and the DJIA closed up almost 40 points.

Byline: Lafferty (MF Merlin)