FOR RELEASE: November 3, 2000

Contact:	Kristen Kioa
	NAPM, Media Relations
	Tempe, Arizona
	800/888-6276, Ext. 3015

NON-MANUFACTURING BUSINESS ACTIVITY GROWS AT A SLOWER RATE IN OCTOBER 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 October 2000.

Business Activity, New Orders, and Order Backlogs Increase at Slower Rates

(Tempe, Arizona) — Business in the non-manufacturing sector grew more slowly in October 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 October, NAPM's Non-Manufacturing Business Activity Index continued its long-term growth trend but at a slower rate of growth than in September," Kauffman said. "New Orders, and Backlog of Orders increased at slower rates in October than in September, while New Export Orders, Inventories, Imports, Prices, and Employment increased at faster rates. Supplier Deliveries continued its trend of slowness in October at an increased rate of slowing. The Non-Manufacturing Inventory Sentiment Index indicated that purchasing executives felt a greater degree of discomfort with the level of inventories in October than they did in September," Kauffman said.

"NAPM's Non-Manufacturing Business Activity Index registered 58 percent in October, 4 percentage points lower than in September, indicating slower growth in non-manufacturing economic activity. Comments from purchasing executives continued to be mostly positive on business activity in October. Increased business activity in October was reported by 32 percent of purchasers, a decrease of 5 percentage points from the 37 percent reporting more activity in September. Of the industry groups reporting in the October NAPM non-manufacturing survey, 13 indicated increased activity and 3 indicated decreased activity compared to September. In September, 11 industry groups reported increased activity, 2 reported decreased activity, and 4 reported no change in activity level," said Kauffman.

This month our members again (for the 5th consecutive month) reported higher inventories and also indicated a slightly more rapid rate of increase in the prices they pay for their purchases. Members indicate they are increasing inventories to meet the needs of increased business and for anticipated seasonal demand. The Prices Index increased slightly in October and has remained in the 59 to 61.5 percent range for the past four months. The percentage of members reporting higher prices decreased to 26 percent in October from 27 percent in September, but the proportion indicating no change increased 3 points to 70 percent and the number who noted lower prices decreased 2 points to 4 percent.

"Overall in October, non-manufacturing industries continued their long-term growth trend at a decreased rate of growth compared to September. This month the Business Activity Index, the New Orders Index, and the Backlog of Orders Index all decreased from their September levels. Non-manufacturing inventories grew more strongly than in September. Employment rose at a somewhat faster rate of increase, and Prices increased at a slightly faster rate in October," Kauffman commented.

NAPM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE

Series	October Indexes	September Indexes	October vs. September Index Change	Direction and Rate of Change
Business Activity	58.0	62.0	-4.0	Increasing Slower
New Orders	57.5	61.0	-3.5	Increasing Slower
Backlog of Orders	53.5	56.5	-3.0	Increasing Slower
New Export Orders	55.0	51.5	+3.5	Increasing Faster
Inventory Change	55.0	53.5	+1.5	Increasing Faster
Inventory Sentiment	67.5	65.0	+2.5	Increased Feeling of "too high"
Imports	57.5	49.0	+8.5	Increasing from Decreasing
Prices	61.0	60.5	+0.5	Increasing Faster
Employment	53.5	52.0	+1.5	Increasing Faster
Supplier Deliveries	54.5	53.0	+1.5	Slowing at a Faster Rate

COMPARISON OF NAPM NON-MANUFACTURING AND NAPM MANUFACTURING SURVEYS*

Business Activity increased in non-manufacturing industries and production decreased in manufacturing industries in October. New orders and backlog of orders also increased for non-manufacturing and decreased in the manufacturing sector. Prices increased in October for both areas but rose faster for non-manufacturing. Employment in October increased for non-manufacturing but decreased significantly in the manufacturing sector. Inventories decreased for manufacturing but increased for non-manufacturing. New export orders also increased for non-manufacturing but were reduced in manufacturing. Supplier delivery performance in October was reported to be slower in both sectors and slowed at a faster rate in non-manufacturing. Use of Imports was up in both manufacturing and non-manufacturing and increased at a faster rate in non-manufacturing.

Non-Manufacturing Survey Questions	Indexes	Manufacturing Survey Questions	Indexes
Business Activity	58.0	Production	48.4
New Orders	57.5	New Orders	48.0
Backlog of Orders	53.5	Backlog of Orders	41.0
New Export Orders	55.0	New Export Orders	48.3
Inventory Change	55.0	Inventories	45.4
Inventory Sentiment	67.5
Imports	57.5	Imports	51.8
Prices	61.0	Prices	56.5
Employment	53.5	Employment	47.9
Supplier Deliveries	54.5	Supplier Deliveries	51.4

*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 October decreased to 58 percent, indicating increased business activity at a slower rate of increase than in September (62 percent). Purchasing executives' comments in October continued to be very positive. The percent of members reporting increased activity dropped from 37 percent in September to 32 percent in October. Members reporting decreased activity increased from 13 percent in September to 16 percent in October. Those reporting no change in activity in October totaled 52 percent, an increase of 2 percentage points from September's 50 percent.

The industries reporting the highest rates of growth of business activity in October were:
Mining; Business Services; Utilities; Finance and Banking; Insurance; and Construction.

Business Activity	% Higher	% Same	% Lower	Index
October 2000	32	52	16	58.0
September 2000	37	50	13	62.0
August 2000	32	56	12	60.0
July 2000	26	59	15	55.5

Non-Manufacturing New Orders

NAPM's Non-Manufacturing New Orders Index decreased to 57.5 percent in October from 61 percent in September. Comments from members included: "Office consolidation," "Higher nursing home admissions," "More business and new projects and programs," and "Major capital equipment orders taking place."

The industries reporting the highest rates of growth of new orders in October were: Mining; Utilities; Construction; Business Services; and Retail Trade.

New Orders	% Higher	% Same	% Lower	Index
October 2000	30	55	15	57.5
September 2000	35	52	13	61.0
August 2000	33	53	14	59.5
July 2000	29	56	15	57.0

Non-Manufacturing Backlog of Orders

NAPM's Non-Manufacturing Backlog of Orders Index indicated increased backlogs for the ninth consecutive month by registering 53.5 percent in October. This is a decrease of 3 percentage points from September's 56.5 percent, indicating a decreased rate of growth in order backlogs in October. Purchasing executives' comments on backlogs of orders included: "Logistics challenges — shipping and warehousing," "Vendors are catching up with heavy order activity last 2 months," "Supplier performance improvement," and "Still have backlog based on high order activity." Of the total respondents in October, 26 percent indicated they do not measure backlog of orders.

The industries reporting the highest rates of growth of backlog of orders in October were: Construction; Agriculture; Communication; Finance and Banking; and Retail Trade.

Backlog of Orders	% Higher	% Same	% Lower	Index
October 2000	21	65	14	53.5
September 2000	22	69	9	56.5
August 2000	19	66	15	52.0
July 2000	18	65	17	50.5

Non-Manufacturing Supplier Deliveries

The delivery performance of suppliers to non-manufacturing organizations slowed at a somewhat faster rate in October than in September. NAPM's Non-Manufacturing Supplier Deliveries Index for October was 54.5 percent compared to 53 percent in September. Comments from purchasing executives included: "Capacity issues with certain suppliers," "Lead times longer due to volume," "Parts and resin shortages," and "Strong construction in all areas depleting the manufacturing inventories."

The industries that reported the highest rates of slowness of supplier deliveries in October were: Finance and Banking; Wholesale Trade; Insurance; Retail Trade; and Construction.

Supplier Deliveries	% Higher	% Same	% Lower	Index
October 2000	2	87	11	54.5
September 2000	6	82	12	53.0
August 2000	3	84	13	55.0
July 2000	4	83	13	54.5

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 October for the eighth consecutive month. The rate of increase in October was faster than in September as NAPM's Non-Manufacturing New Export Orders Index rose to 55 percent from September's 51.5 percent. Of the total respondents in October, 70 percent indicated they either do not perform, or do not separately measure, orders for work outside the United States.

The industries reporting the highest rates of growth of new export orders in October were: Mining; Health Services; Real Estate; Utilities; and Retail Trade.

New Export Orders	% Higher	% Same	% Lower	Index
October 2000	23	64	13	55.0
September 2000	16	71	13	51.5
August 2000	18	76	6	56.0
July 2000	17	72	11	53.0

Non-Manufacturing Imports

Use of imported materials by non-manufacturing industries jumped back to growth in October after decreasing in September for the first time in six consecutive months. Members indicated a need to balance exports to Mexico and preparing for seasonal requirements among reasons for the increase in October. NAPM's Non-Manufacturing Imports Index for October was 57.5 percent compared to 49 percent in September. In October, 65 percent of respondents reported that they do not use or do not track the use of imported materials.

The industries reporting decreased use of imports in October were: Wholesale Trade; Retail Trade; Business Services; Health Services; and *Other Services.

Imports	% Higher	% Same	% Lower	Index
October 2000	18	79	3	57.5
September 2000	6	86	8	49.0
August 2000	14	81	5	54.5
July 2000	17	75	8	54.5

Non-Manufacturing Inventory Change

Material inventories maintained by non-manufacturing organizations increased in October for the seventh time in eight months. NAPM's Non-Manufacturing Inventories Index registered 55 percent in October, an increase of 1.5 percentage points from the 53.5 percent reported in September. The October Index also was the highest index of inventory change since the inception of NAPM's non-manufacturing business survey in July 1997. Of the total respondents in October, 22 percent indicated they do not have inventories. Comments from member purchasers included: "Increased cable plant construction activity," "Building (inventory) for holiday," "Preparation for peak season," and "Preparing for seasonal increase — sales lower than anticipated."

Industries reporting increased inventory in October were: Retail Trade; Business Services; Transportation; Insurance; Mining; and Real Estate.

Inventory Change	% Higher	% Same	% Lower	Index
October 2000	25	60	15	55.0
September 2000	24	59	17	53.5
August 2000	19	64	17	51.0
July 2000	19	64	17	51.0

Non-Manufacturing Inventory Sentiment

The NAPM Non-Manufacturing Inventory Sentiment Index in October registered 67.5 percent compared to 65 percent for September. This rise in the index level indicates that non-manufacturing purchasing executives felt a greater degree of discomfort with current levels of inventory in October than they did during September and coincides with the highest ever Inventories Index. In October, 38 percent of members felt their inventories were too high (40 percent in September). Also in October, 3 percent indicated their inventories were too low (10 percent in September), and 59 percent said that their inventories were about right (50 percent in September).

The industries that reported the highest rates of feeling that their inventories were "too high" in October were: Communication; Utilities; Business Services; Wholesale Trade; and Health Services.

Inventory Sentiment	% Higher	% Same	% Lower	Index
October 2000	38	59	3	67.5
September 2000	40	50	10	65.0
August 2000	28	67	5	61.5
July 2000	40	56	4	68.0

Non-Manufacturing Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in October for the 20th consecutive month and at a slightly higher rate of increase than in September. NAPM's Non-Manufacturing Price Index for October rose to 61 percent from 60.5 percent in September.

The industries that reported the highest rate of increase in prices paid in October were: Mining; Construction; Insurance; Public Administration; and Health Services.

Prices	% Higher	% Same	% Lower	Index
October 2000	26	70	4	61.0
September 2000	27	67	6	60.5
August 2000	23	72	5	59.0
July 2000	29	65	6	61.5

Non-Manufacturing Employment

Employment in the non-manufacturing sector grew at a faster rate in October than in September. NAPM's Non-Manufacturing Employment Index for October was 53.5 percent compared to 52 percent in September. Comments from purchasers included: "Expansion of current facilities," "Many new large projects starting," "Backlog of positions," and "Increased business — retention challenges."

The industries reporting the highest rates of growth of employment in October were: Communication; Construction; Real Estate; Insurance; and Mining.

Employment	% Higher	% Same	% Lower	Index
October 2000	20	67	13	53.5
September 2000	20	64	16	52.0
August 2000	22	64	14	54.0
July 2000	19	69	12	53.5

*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:

Fiber Optic Cable; Furniture — 2nd month; Labor; Laptops — 8th month; Temporary Help — 2nd month.

Commodities Reported Up in Price:

Airline Tickets — 2nd month; Caustic Soda; Chemicals; Diesel Fuel — 5th month; Freight Services — 3rd month; Fuel — 9th month; Furniture; Gasoline — 2nd month; Labor — 3rd month; Natural Gas — 2nd month; Oil; Paper — 19th month (some reports of price decreases); Paper Products (some reports of price decreases); Petroleum Based Products — 2nd month; Pharmaceuticals; Plastics — 2nd month; Temporary Help — 4th month.

Commodities Reported Down in Price:

Computers — 8th month.

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 180 affiliates with more than 45,000 members in the United States.

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 November 2000 data will be released at 10:00 a.m. (ET) on December 5, 2000.

Back to Top