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September 2001 Non-Manufacturing NAPM Report On Business®

FOR RELEASE: October 3, 2001

Contact: Kristen Kioa
  NAPM, Media Relations
  Tempe, Arizona
  800/888-6276, Ext. 3015
NON-MANUFACTURING BUSINESS ACTIVITY FLAT IN SEPTEMBER SAY PURCHASING AND SUPPLY EXCUTIVES IN LATEST NON-MANUFACTURING NAPM REPORT ON BUSINESS®

DO NOT CONFUSE THIS NATIONAL NON-MANUFACTURING REPORT with the various regional purchasing and supply 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 September 2001.

New Orders, Order Backlogs, Inventories, Employment, and Prices Decrease
Exports and Imports Increase
Supplier Deliveries Slightly Slower

(Tempe, Arizona) — Business activity in the non-manufacturing sector barely grew in September 2001 say the nation's purchasing and supply 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 September, NAPM's Non-Manufacturing Business Activity Index indicated a very slight increase in activity in the non-manufacturing economy compared to August," Kauffman said. He also added, "Member comments regarding the effects on business activity of the September 11th terrorist events indicated increased uncertainty with the most immediate negative impact on air transportation and on activities that require air travel. The transportation sector had the highest rates of decline in Business Activity, New Orders, and Employment. However, some members anticipate a positive effect — notably defense and some energy industries." Kauffman also said, "New Orders decreased and Order Backlogs shrank compared to August. Exports and Imports both increased. Employment was reduced and Inventories continued to decline. Supplier Deliveries were slightly slower in September after being slightly faster in August. The Inventory Sentiment Index indicated that purchasing and supply executives felt a somewhat lesser degree of discomfort with the level of inventories in September than they did in August."

"NAPM's Non-Manufacturing Business Activity Index registered 50.2 percent in September, 4.7 percentage points higher than in August and indicating almost no change in non-manufacturing economic activity. Reports from purchasing and supply executives indicate nine industry groups are continuing to contract or had no change from August, while eight sectors indicated growth in September. Increased business activity in September was reported by 26 percent of members, compared to 18 percent in August. Reduced activity was reported by 23 percent of members compared to 26 percent in August. In September the remaining 51 percent of members indicated no change in business activity. This compares to 56 percent that reported no change in August," said Kauffman.

"Overall in September, non-manufacturing industries were trying to determine the impact on their businesses from the September 11th terrorist attacks. Most NAPM Non-Manufacturing Indexes indicated reduced activity including New Orders and Backlog of Orders. Also, Inventories, Prices, and Employment continued to decrease compared to August," Kauffman commented.

NAPM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE and
COMPARISON OF NAPM NON-MANUFACTURING AND NAPM MANUFACTURING SURVEYS*
  Non-Manufacturing Manufacturing


Index

September
Index %

August
Index %
Index
Change from
August
Direction

& Rate of
Change

September
Index %

August
Index %
Index
Change from
August
Business Activity/ Production 50.2 45.5 +4.7 Increasing from Decreasing 51.3 52.2 -0.9
New Orders 49.8 45.9 +3.9 Decreasing Slower 50.3 53.1 -2.8
Backlog of Orders 48.5 41.5 +7.0 Decreasing Slower 43.0 44.5 -1.5
New Export Orders 53.5 47.5 +6.0 Increasing from Decreasing 45.9 51.9 -6.0
Inventories 44.5 43.5 +1.0 Decreasing Slower 38.9 37.7 +1.2
Inventory Sentiment 64.0 65.5 -1.5 Decreased Feeling of "too high" N/A    
Imports 55.0 53.8 +1.2 Increasing Faster 50.3 49.7 +0.6
Prices 49.0 48.0 +1.0 Decreasing Slower 36.3 33.9 +2.4
Employment 46.7 45.9 +0.8 Decreasing Slower 41.2 40.8 +0.4
Supplier Deliveries 51.0 48.0 +3.0 Slower from Faster 46.5 46.5 0.0

* Manufacturing NAPM Report On Business® data is seasonally adjusted except for Backlog of Orders. Non-Manufacturing NAPM Report On Business® data is seasonally adjusted for Business Activity, New Orders, Imports, and Employment.

Non-Manufacturing Business Activity

NAPM's Non-Manufacturing Business Activity Index in September increased 4.7 percentage points to 50.2 percent from August's 45.5 percent. September's Index basically indicated no change in activity in September compared to August. While eight sectors reported increased business activity in September, nine reported either decreased activity or no growth in activity. The percent of members reporting increased activity in September is 26 percent compared to 18 percent in August. Members reporting decreased activity was 23 percent in September, compared to 26 percent in August. Those reporting no change in activity in September totaled 51 percent, a decrease of 5 percentage points from August's 56 percent.

The industries reporting the highest rates of growth of business activity in September were: Entertainment; Utilities; Mining; Public Administration; and Health Services. The industries reporting contraction of business activity in September were: Transportation; Insurance; Agriculture; Retail Trade; Communication; and Construction.

Business
Activity
%
Higher
%
Same
%
Lower

Index
September 2001 26 51 23 50.2
August 2001 18 56 26 45.5
July 2001 21 53 26 48.9
June 2001 30 50 20 52.1

Non-Manufacturing New Orders

NAPM's Non-Manufacturing New Orders Index rose to 49.8 percent in September from 45.9 percent in August. Comments from members included: "Uncertain world situation," "End of budget year," "Lower demand as a result of new cost cutting initiatives," and "Low business levels."

The industries reporting the highest rates of growth of new orders in September were: Entertainment; Health Services; Mining; *Other Services; and Wholesale Trade. The industries reporting the highest rates of contraction of new orders in September were: Transportation; Insurance; Agriculture; Communication; and Retail Trade.

New
Orders
%
Higher
%
Same
%
Lower

Index
September 2001 24 54 22 49.8
August 2001 19 54 27 45.9
July 2001 20 52 28 48.6
June 2001 32 48 20 53.1

Non-Manufacturing Backlog of Orders

NAPM's Non-Manufacturing Backlog of Orders Index registered 48.5 percent in September. This is the ninth consecutive monthly decline in order backlogs. The September index is an increase of 7 percentage points from August's 41.5 percent. Purchasing and supply executives' comments on backlogs of orders included: "Working down service orders," "Fewer new orders and cancellation of some existing projects," "Uncertain world situation — especially in the Middle East," and "Due to lower ordering levels backlogs are coming current." Of the total respondents in September, 31 percent indicated they do not measure backlog of orders.

The industries reporting the highest rates of growth of backlog of orders in September were: Legal Services; Transportation; Mining; Entertainment; and Insurance. The industries reporting the highest rates of decline of order backlogs in September were: Agriculture; Business Services; Public Administration; Utilities; and Finance and Banking.

Backlog
of Orders
%
Higher
%
Same
%
Lower

Index
September 2001 13 71 16 48.5
August 2001 10 63 27 41.5
July 2001 9 67 24 42.5
June 2001 13 72 15 49.0

Non-Manufacturing Supplier Deliveries

The delivery performance of suppliers to non-manufacturing organizations was slower in September than in August, registering an index value of 51 percent. However, many comments from purchasing and supply executives concerning supplier deliveries indicated increased supplier abilities to deliver and included: "Increased capacity due to slowing economic conditions," "They have more (more material in supplier inventories)," "Plants are full," and " Business has increased for many of our suppliers which has stretched lead times."

The industries that reported the highest rates of slowness of supplier deliveries in September were: Legal Services; Transportation; Entertainment; Retail Trade; and Insurance. The industries that reported faster supplier deliveries in September were: Communication; *Other Services; and Public Administration.

Supplier
Deliveries
%
Higher
%
Same
%
Lower

Index
September 2001 5 88 7 51.0
August 2001 10 84 6 48.0
July 2001 5 89 6 50.5
June 2001 5 88 7 51.0

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 September after decreasing in August. The New Export Orders Index for September is 53.5 percent compared to August's 47.5 percent. Of the total respondents in September, 74 percent indicated they either do not perform, or do not separately measure, orders for work outside the United States.

The industries reporting increases in new export orders in September were: Finance and Banking; Mining; Business Services; and Wholesale Trade. Industries reporting decreases in new export orders in September were: Communication; *Other Services; and Retail Trade.

New Export
Orders
%
Higher
%
Same
%
Lower

Index
September 2001 16 75 9 53.5
August 2001 13 69 18 47.5
July 2001 18 70 12 53.0
June 2001 16 67 17 49.5

Non-Manufacturing Imports

Use of imported materials by non-manufacturing industries increased in September for the second time in nine months. NAPM's Non-Manufacturing Imports Index for September was 55 percent, an increase of 1.2 percentage points from the 53.8 percent reported in August. In September, 67 percent of respondents reported that they do not use or do not track use of imported materials.

The industries reporting increased use of imports in September were: Business Services; Wholesale Trade; and Utilities. Industries reporting decreased use of imports in September were: Entertainment; *Other Services; and Retail Trade.


Imports
%
Higher
%
Same
%
Lower

Index
September 2001 17 79 4 55.0
August 2001 15 77 8 53.8
July 2001 11 81 8 49.9
June 2001 14 72 14 48.6

Non-Manufacturing Inventory Change

Material inventories maintained by non-manufacturing organizations decreased in September for the 11th consecutive month but at a slower rate than in August. NAPM's Non-Manufacturing Inventories Index registered 44.5 percent in September, an increase of 1 percentage point from the 43.5 percent reported in August. Of the total respondents in September, 23 percent indicated they do not have inventories. Comments from members included: "Continued efforts to reduce need for warehouse space," "Building inventories for holiday retail sales support," "Supplier deliveries have improved, so we can reduce inventory," and "Selling off aged inventory."

The industries reporting inventory increases in September were: Mining; Utilities; Agriculture; Health Services; and *Other Services. Industries reporting the highest rates of inventory decrease in September were: Communication; Transportation; Retail Trade; Real Estate; and Public Administration.

Inventory
Change
%
Higher
%
Same
%
Lower

Index
September 2001 16 57 27 44.5
August 2001 13 61 26 43.5
July 2001 20 52 28 46.0
June 2001 20 57 23 48.5

Non-Manufacturing Inventory Sentiment

The NAPM Non-Manufacturing Inventory Sentiment Index in September registered 64 percent compared to 65.5 percent for August. This decrease in the index level indicates that non-manufacturing purchasing and supply executives felt a lesser degree of discomfort with current levels of inventory in September than they did during August. In September, 35 percent of members felt their inventories were too high (38 percent in August). Also in September, 7 percent indicated their inventories were too low (same percent as in August) and 58 percent said that their inventories were about right (55 percent in August).

The industries that reported the highest rates of feeling that their inventories were "too high" in September were: Legal Services; Transportation; Utilities; Insurance; and Wholesale Trade.

Inventory
Sentiment
% Too
High
% About
Right
% Too
Low

Index
September 2001 35 58 7 64.0
August 2001 38 55 7 65.5
July 2001 32 59 9 61.5
June 2001 36 58 6 65.0

Non-Manufacturing Prices

Prices paid by non-manufacturing organizations for purchased materials and services decreased in September for the third consecutive month, indicating continued downward pressure on prices. NAPM's Non-Manufacturing Prices Index for September is 49 percent, 1 percentage point higher than August's 48 percent. The percentage of members reporting higher prices increased to 12 percent in September, the proportion indicating no change dropped 2 percentage points to 74 percent, and the number who noted lower prices remained at 14 percent for the second month.

The industries that reported the highest rates of increase in prices paid in September were: Legal Services; Agriculture; Construction; Insurance; and Entertainment. The industries that reported the highest rates of price decreases in September were: Utilities; Business Services; Finance and Banking; Wholesale Trade; and Real Estate.


Prices
%
Higher
%
Same
%
Lower

Index
September 2001 12 74 14 49.0
August 2001 10 76 14 48.0
July 2001 10 78 12 49.0
June 2001 20 71 9 55.5

Non-Manufacturing Employment

Employment in the non-manufacturing sector contracted in September for the seventh consecutive month. NAPM's Non-Manufacturing Employment Index for September was 46.7 percent compared to 45.9 percent in August. Comments from members included: "Continue to lay off employees to meet declining business revenues," "Not replacing open positions immediately," "Just controlling hours — no overtime," and "Slowdown in tourism."

The only Industry reporting growth in employment in September was: Mining. Industries reporting the highest rates of reduction in employment in September were: Transportation; Entertainment; Communication; Agriculture; and Real Estate.


Employment
%
Higher
%
Same
%
Lower

Index
September 2001 12 66 22 46.7
August 2001 10 71 19 45.9
July 2001 14 70 16 46.4
June 2001 14 67 19 45.1

*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

American Flags; Certain Copper Items; Certain Stainless Steel Items.

Commodities Reported Up in Price

Beef; Cheese; Diesel Fuel; Fuel (some reports of price decreases); Gasoline (some reports of price decreases); Laser Printers; Paper (some reports of price decreased); Toner.

Commodities Reported Down in Price

Acetone; Computers (PCs) — 19th month; Natural Gas — 2nd month; Paper Products; Plastics; Plastic Resin and Resin-Based Products; Polyethylene Items; Stretch Film.

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 and supply 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 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 supply management research and education organization in the United States. In May 2001 the membership of the National Association of Purchasing Management voted to change the association's name to the Institute for Supply Management™ . The association, established in 1915, is the world's leading educator of supply management professionals and is a valuable resource for decision makers in major markets, organizations, and government. This change reflects recognition of the increasing strategic and global significance of supply management, and becomes effective January 1, 2002. For further information, see NAPM's Web site at www.ism.ws.

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 October 2001 data will be released at 10:00 a.m. (ET) on November 5, 2001.



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