April 2000 Non-Manufacturing Report On Business®

FOR RELEASE: May 3, 2000

Contact: Julia Ogden
  NAPM Media Relations
  480/752-6276 ext. 3086
NON-MANUFACTURING BUSINESS ACTIVITY CONTINUES TO GROW IN APRIL SAY PURCHASING EXECUTIVES IN LATEST NON-MANUFACTURING NAPM REPORT ON BUSINESS®

DO NOT CONFUSE THIS NATIONAL NON-MANUFACTURING REPORT with the various regional purchasing reports released across the country or the Manufacturing NAPM Report On Business®. The national non-manufacturing report's information reflects the entire United States, while the regional reports cover only their local vicinity. Also, the information in the regional reports is not used in calculating the results of the national report. The information compiled in this report is for the month of April 2000.

Business Activity Index Up to 65%
New Orders, Order Backlogs, Export Orders, and Inventories Increase

(Tempe, Arizona) — Business in the non-manufacturing sector grew in April 2000 say the nation's purchasing executives in the latest Non-Manufacturing NAPM Report On Business®.

The report was issued today by Ralph G. Kauffman, Ph.D., C.P.M., chair of the National Association of Purchasing Management's Non-Manufacturing Business Survey Committee and coordinator of the purchasing and supply management program, University of Houston-Downtown. "In April, NAPM's Non-Manufacturing Business Activity Index continued its long-term growth trend with continued strength, indicating a faster rate of increase in business than in March," Kauffman said. "New Orders, Backlog of Orders, New Export Orders, and Inventories also increased at faster rates in April. Supplier Deliveries were slower than in March, and with an increased rate of slowing. Imports, Prices, and Employment all increased in March. The Non-Manufacturing Inventory Sentiment Index indicated that purchasing executives felt a higher degree of discomfort with the level of inventories in April than they did in March," Kauffman said.

"NAPM's Non-Manufacturing Business Activity Index registered 65 percent in April, 1 percentage point higher than in March, indicating slightly faster growth in non-manufacturing economic activity. Comments from purchasing executives were very positive on business activity in April. Increased business activity in April was reported by 37 percent of purchasers, a decrease of 2 percentage points from the 39 percent reporting more activity in March. Of the industry groups reporting in the April NAPM non-manufacturing survey, 14 indicated increased activity and 2 indicated decreased activity. In March, 15 industry groups reported increased activity, and 1 reported decreased activity," said Kauffman.

This month our members reported an increase in their inventories compared to March. Comments from some members indicated they are stocking up for expected increases in business, while others indicated seasonal buildups. Prices paid by members' firms for purchased materials and services continue to be a concern. While the Price Index decreased slightly in April (to 71 percent from 72 percent in March), it has risen from 56 percent in December 1999. The percent of members reporting higher prices also dipped somewhat in April (to 47 percent from 50 percent in March). However, in December 1999 only 17 percent of members reported paying higher prices for materials and services.

"Overall in April, non-manufacturing industries continued their long-term growth trend. This month the Business Activity Index and the New Orders Index both reached their highest levels since inception of the NAPM non-manufacturing survey in July 1997. Non-manufacturing employment rose in April, and the Prices Index declined only slightly," Kauffman commented.

NAPM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
Series April
Indexes
March
Indexes
April vs. March
Index Change
Direction and Rate
of Change
Business Activity 65.0 64.0 +1.0 Increasing Faster
New Orders 65.0 64.0 +1.0 Increasing Faster
Backlog of Orders 55.5 53.0 +2.5 Increasing Faster
New Export Orders 59.0 55.5 +3.5 Increasing Faster
Inventory Change 53.5 51.5 +2.0 Increasing Faster
Inventory Sentiment 64.0 60.5 +4.5 Increased Feeling of "too high"
Imports 55.5 58.0 -2.5 Increasing Slower
Prices 71.0 72.0 -1.0 Increasing Slower
Employment 56.0 56.0 0 Increasing at Same Rate
Supplier Deliveries 55.0 52.5 +2.5 Slowing at a Faster Rate

COMPARISON OF NAPM NON-MANUFACTURING AND NAPM MANUFACTURING SURVEYS*

Business Activity in non-manufacturing industries and production in manufacturing industries both grew in April with a faster rate of growth in non-manufacturing business activity. New orders also increased for both the non-manufacturing and manufacturing sectors with a greater rate of increase for non-manufacturing. Backlog of orders increased for both sectors, and at a faster rate for non-manufacturing. Prices increased in April for both areas but rose faster for manufacturing. Employment in April increased for both sectors and grew faster for non-manufacturing. Inventories decreased for manufacturing and increased for non-manufacturing. New export orders increased for both manufacturing and non-manufacturing with a faster rate of increase for non-manufacturing. Supplier delivery performance in April was reported to be slower by both sectors but with a higher rate of slowness in manufacturing. Use of Imports was up in both manufacturing and non-manufacturing in April with non-manufacturing reporting a higher rate of increase.

Non-Manufacturing
Survey Questions
Indexes Manufacturing
Survey Questions
Indexes
Business Activity 65.0 Production 58.2
New Orders 65.0 New Orders 56.3
Backlog of Orders 55.5 Backlog of Orders 51.0
New Export Orders 59.0 New Export Orders 50.7
Inventory Change 53.5 Inventories 45.2
Inventory Sentiment 64.0    
Imports 55.5 Imports 55.1
Prices 71.0 Prices 76.0
Employment 56.0 Employment 53.2
Supplier Deliveries 55.0 Supplier Deliveries 55.6

* Manufacturing NAPM Report On Business® data is seasonally adjusted except for Backlog of Orders. Non-Manufacturing NAPM Report On Business® data is not seasonally adjusted.

Non-Manufacturing Business Activity

NAPM's Non-Manufacturing Business Activity Index in April rose to 65 percent, indicating increased business activity at a slightly faster rate of increase than in March (64 percent). The Business Activity Index for April was the highest since inception of NAPM's non-manufacturing business survey in July 1997. Purchasing executives' comments in April were very positive. The percent of members reporting increased activity dipped from 39 percent in March to 37 percent in April. Members reporting decreased activity dropped from 11 percent in March to 7 percent in April. Those reporting no change in activity in April totaled 56 percent, an increase of 6 percentage points from March's 50 percent.

The industries reporting the highest rates of growth of business activity in April were: Transportation; Communication; Wholesale Trade; Real Estate; Public Administration; and Agriculture.

Business Activity % Higher % Same % Lower Index
April 2000 37 56 7 65.0
March 2000 39 50 11 64.0
February 2000 28 60 12 58.0
January 2000 30 45 25 52.5

Non-Manufacturing New Orders

NAPM's Non-Manufacturing New Orders Index increased to 65 percent in April from 64 percent in March, indicating a slightly faster rate of increase for new orders to non-manufacturers. April's New Orders Index is the highest reported since inception of NAPM's non-manufacturing business survey in July 1997 and indicates continued high levels of activity with an increased rate of growth. Comments from members included: "Pulp and paper, high tech industries seem to be spending more capital money," "Sales expansion," and "Increased activity."

The industries reporting the highest rates of growth of new orders in April were: Transportation; Business Services; Real Estate; Communication; and Public Administration.

New Orders % Higher % Same % Lower Index
April 2000 38 54 8 65.0
March 2000 37 54 9 64.0
February 2000 29 60 11 59.0
January 2000 32 49 19 56.5

Non-Manufacturing Backlog of Orders

NAPM's Non-Manufacturing Backlog of Orders Index grew for the third consecutive month and rose to 55.5 percent in April from 53 percent in March, indicating an increased rate of growth in order backlogs. Purchasing executives' comments on backlogs of orders included: "More construction contracts," "New orders Increased," "Increased retail sales," and "Awarded more jobs." Of the total respondents in April, 29.1 percent indicated they do not measure backlog of orders.

The industries reporting the highest rates of growth of backlog of orders in April were: Real Estate; Public Administration; Mining; *Other Services; and Insurance.

Backlog
of Orders
% Higher % Same % Lower Index
April 2000 18 75 7 55.5
March 2000 17 72 11 53.0
February 2000 17 70 13 52.0
January 2000 15 67 18 48.5

Non-Manufacturing Supplier Deliveries

The delivery performance of suppliers to non-manufacturing organizations slowed at a faster rate in April than in March. NAPM's Non-Manufacturing Supplier Deliveries Index for April was 55 percent compared to 52.5 percent in March. Comments from purchasing executives included: "Slower rail deliveries," "(Suppliers) overwhelmed by volume," "Increase in backorders," and "Suppliers out of some stock due to increased sales."

The industries that reported the highest rates of slowness of supplier deliveries in April were: Entertainment; Real Estate; Communication; Wholesale Trade; and Utilities.

Supplier
Deliveries
% Higher % Same % Lower Index
April 2000 4 82 14 55.0
March 2000 7 81 12 52.5
February 2000 3 84 13 55.0
January 2000 4 81 15 55.5

Non-Manufacturing New Export Orders

Orders and requests for services and other non-manufacturing activities to be provided outside of the United States by domestically-based personnel increased in April for the second consecutive month. NAPM's Non-Manufacturing New Export Orders Index was 59 percent in April compared to 55.5 percent in March. Of the total respondents in April, 75.5 percent indicated they either do not perform, or do not separately measure, orders for work outside the United States.

The industries reporting growth of new export orders in April were: Health Services; Finance and Banking; Business Services; Communication; and Retail Trade.

New Export
Orders
% Higher % Same % Lower Index
April 2000 19 80 1 59.0
March 2000 15 81 4 55.5
February 2000 11 73 16 47.5
January 2000 24 67 9 57.5

Non-Manufacturing Imports

Use of imported materials by non-manufacturing industries increased, although at a slower rate, for the second consecutive month in April. NAPM's Non-Manufacturing Imports Index for April was 55.5 percent compared to 58 percent in March. In April, 69.7 percent of respondents reported that they do not use or do not track use of imported materials.

The industries reporting higher rates of growth in use of imports in April were: Mining; Construction; Communication; Agriculture; and *Other Services.

Imports % Higher % Same % Lower Index
April 2000 16 79 5 55.5
March 2000 21 74 5 58.0
February 2000 14 72 14 50.0
January 2000 10 80 10 50.0

Non-Manufacturing Inventory Change

Material inventories maintained by non-manufacturing organizations increased in April for the second consecutive month. NAPM's Non-Manufacturing Inventories Index registered 53.5 percent in April, compared to 51.5 percent in March. Of the total respondents in April, 24.6 percent indicated they do not have inventories. Comments from member purchasers included: "Anticipating busy season," "Stock for network expansion," "Increased (inventory) due to new customers and estimated usage," and "(Increased inventories) to support increased sales activity."

Industries reporting the highest rates of inventory increase in April were: Agriculture; Real Estate; Wholesale Trade; Construction; Public Administration; Insurance; and *Other Services.

Inventory
Change
% Higher % Same % Lower Index
April 2000 25 57 18 53.5
March 2000 22 59 19 51.5
February 2000 19 61 20 49.5
January 2000 20 59 21 49.5

Non-Manufacturing Inventory Sentiment

The NAPM Non-Manufacturing Inventory Sentiment Index in April registered 64 percent compared to 60.5 percent for March. This increased index level indicates that non-manufacturing purchasing executives felt a greater degree of discomfort with current levels of inventory in April than they did during March. In April, 31 percent of members felt their inventories were too high (29 percent in March). Also in April, 3 percent indicated their inventories were too low (8 percent in March), and 66 percent said that their inventories were about right (63 percent in March).

The industries that reported the highest rates of feeling that their inventories were "too high" in April were: Transportation; Utilities; Construction; Mining; Entertainment; and Wholesale Trade.

Inventory
Sentiment
% Higher % Same % Lower Index
April 2000 31 66 3 64.0
March 2000 29 63 8 60.5
February 2000 39 55 6 66.5
January 2000 40 54 6 67.0

Non-Manufacturing Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in April for the 14th consecutive month but at a slightly lower rate of increase than in March. NAPM's Non-Manufacturing Price Index for April eased to 71 percent, compared to 72 percent in March. The April Price Index was the second highest (next to March) since inception of NAPM's non-manufacturing business survey in July 1997.

The industries that reported the highest rate of increase in prices paid in April were: Transportation; Agriculture; Retail Trade; Wholesale Trade; and Mining.

Prices % Higher % Same % Lower Index
April 2000 47 48 5 71.0
March 2000 50 44 6 72.0
February 2000 39 59 2 68.5
January 2000 28 67 5 61.5

Non-Manufacturing Employment

Employment in the non-manufacturing sector grew at the same rate in April as in March after being unchanged in February. NAPM's Non-Manufacturing Employment Index for April and March was 56 percent compared to 50 percent for February. Comments from purchasers included: "Business growth," "New construction jobs," "Increased workload," and "More production — company growing."

The industries reporting the highest rates of growth of employment in April were: Communication; Real Estate; Utilities; Insurance; and Public Administration.

Employment % Higher % Same % Lower Index
April 2000 21 70 9 56.0
March 2000 22 68 10 56.0
February 2000 14 72 14 50.0
January 2000 13 75 12 50.5

*Other Services include:
Hotels, Rooming Houses, Camps, and Other Lodging Places; Personal Services; Automotive Repair, Services, and Parking; Miscellaneous Repair Services; Educational Services; Social Services; Museums, Art Galleries, and Botanical and Zoological Gardens; Membership Organizations; Engineering, Accounting, Research, Management, and Related Services; and Miscellaneous Services.

Commodities Reported in Short Supply

Computer Components; Computer Programmers; Electrical Safety Products; Electronics; Gasoline; Labor — 2nd month; Labor — Skilled; Laptops — 2nd month; PVC Pipe — 3rd month; Rubber Goods; Steel Beams.

Commodities Reported Up in Price

Asphalt — 3rd month; Beef; Chemicals — 2nd month; Coffee; Concrete; Copper — 2nd month; Corrugated — 3rd month; Diesel Fuel — 3rd month; Freight Service — 2nd month; Fuel — 3rd month; Gasoline — 14th month (some reports of price decreases); IT Services; Oil — 3rd month; Oil-based Products; Paper — 13th month (some reports of price decreases); Paper Products — 8th month; Petroleum-based Products — 4th month; Plastic Pipe; Plastics — 2nd month; Plywood; Polyethylene Products; Printing; PVC — 2nd month; PVC Pipe — 3rd month; Resins; Stainless Steel; Steel Pipe; Steel Products; Transportation — 2nd month.

Commodities Reported Down in Price

Cleaning Supplies; Computers — 2nd month (some reports of price increases); Memory; PCs; Software.

Data and Method of Presentation

The Non-Manufacturing NAPM Report On Business® is based on data compiled from monthly replies to questions asked of more than 370 purchasing executives in over 62 different industries representing nine divisions from the Standard Industrial Classification (SIC) categories. Membership of the Business Survey Committee is diversified by SIC category and is based on each industry's contribution to Gross Domestic Product (GDP).

Survey responses reflect the change, if any, in the current month compared to the previous month. For each of the indicators measured (Business Activity, New Orders, Backlog of Orders, New Export Orders, Inventory Change, Inventory Sentiment, Imports, Prices, Employment, and Supplier Deliveries), this report shows the percentage reporting each response, the net difference between the number of responses in the positive economic direction (higher and slower for Supplier Deliveries) and the negative economic direction (lower and faster for Supplier Deliveries). Responses represent raw data and are never changed. The resulting single index number is not seasonally adjusted.

A weighted composite index similar to the Purchasing Managers Index (PMI) that is so popular in the Manufacturing NAPM Report On Business® is not available. Several years of data will need to be developed before that type of non-manufacturing indicator can be developed. Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change and the scope of change. An index reading above 50 percent indicates that the non-manufacturing economy in that index is generally expanding; below 50 percent, that it is generally declining. Supplier Deliveries is an exception. A Supplier Deliveries index above 50 percent indicates slower deliveries and below 50 percent indicates faster deliveries.

The Non-Manufacturing NAPM Report On Business® is published monthly by the National Association of Purchasing Management, the largest purchasing and supply management research and education organization in the United States. NAPM is comprised of 182 affiliates with more than 45,000 members in the United States and Puerto Rico.

The full text version of the Non-Manufacturing NAPM Report On Business® is posted on NAPM's Web site at www.ism.ws on the third business day of every month after 10:10 a.m. (ET).

The next Non-Manufacturing NAPM Report On Business® featuring the May 2000 data will be released at 10:00 a.m. (ET) on June 5, 2000.


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