FOR RELEASE: April 5, 1999

Contact:	Zenobia Daruwalla
	NAPM Media Relations
	602/752-6276 ext. 3015

Non-Manufacturing Business Activity Growth is Stronger in March 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 March 1999.

Business Activity Index at 62.5%
New Orders, Backlog of Orders, Employment, and Prices Increase

(Tempe, Arizona) — Business in the non-manufacturing sector grew in March 1999 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 March, NAPM's Non-Manufacturing Business Activity Index indicated increased activity compared to February, continuing a long-term growth trend," Kauffman said. "New Orders, Backlog of Orders, and use of Imports also increased in March, while Supplier Deliveries were slower. Inventories of non-manufacturing firms shrank, and New Export Orders increased significantly. Prices paid by non-manufacturing organizations for materials and services increased, and the Non-Manufacturing Inventory Sentiment Index indicated that purchasing executives are feeling slightly more uncomfortable with the current level of inventories in March," Kauffman said.

"NAPM's Non-Manufacturing Business Activity Index indicated increased business activity by rising from 57.0 percent in February to 62.5 percent in March. Comments from purchasing executives are heavily positive on business activity in March. Increased business activity in March was reported by 35 percent of purchasers compared to 27 percent who reported increased business in February. Of the industry groups reporting in the March NAPM non-manufacturing survey, fifteen indicated increased activity, none indicated decreased activity, and one reported no change in activity level. In February, twelve industry groups reported increased activity, three indicated decreased activity, and two advised no change," said Kauffman.

Other significant indicators in March include new orders, prices, and employment. NAPM's New Orders Index indicated a faster rate of increase for new orders in March and the highest rate of increase of new orders since May 1998. NAPM's Prices Index indicated increased prices for purchased items for the first time since February 1998. NAPM's Employment Index indicated increased non-manufacturing employment. These indications collectively project a non-manufacturing sector that is growing at a faster rate of growth than in March 1998 and faster than the average for all of 1998. NAPM's Non-Manufacturing Business Activity Index for March is 62.5 percent compared to 59.5 percent for March 1998 and 57.3 percent for the average for all of 1998.

"Overall in March, non-manufacturing industries are continuing their long-term growth trend. Strong growth of order backlogs portends continued growth in the near term. Higher prices for some purchased items and ability to hire qualified labor are areas of concern," Kauffman commented.

NAPM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE

Series	March Indexes	February Indexes	Mar. vs. Feb. Index Change	Direction and Rate of Change
Business Activity	62.5	57.0	+5.5	Increasing Faster
New Orders	60.5	56.5	+4.0	Increasing Faster
Backlog of Orders	55.5	51.5	+4.0	Increasing Faster
New Export Orders	58.5	47.5	+11.0	Increase from Decrease
Inventory Change	47.5	49.5	- 2.0	Decreasing Faster
Inventory Sentiment	61.5	60.5	+1.0	Greater feeling of "too high"
Imports	58.5	51.5	+7.0	Increasing Faster
Prices	50.5	46.5	+4.0	Increase from Decrease
Employment	52.0	49.5	+2.5	Increase from Decrease
Supplier Deliveries	52.5	51.5	+1.0	Slowing at 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 March 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 non-manufacturing and manufacturing. Prices declined for manufacturing in March but increased for non-manufacturing. Inventories decreased in both non-manufacturing and manufacturing industries, with a faster rate of decrease in manufacturing. New export orders increased for both sectors with non-manufacturing experiencing a higher rate of increase. Supplier delivery performance in March was reported to be slower than in February by both sectors with equal rates of slowness. Use of Imports was up in both sectors in March with a higher rate of increase in non-manufacturing.

Non-Manufacturing Survey Questions	Indexes	Manufacturing Survey Questions	Indexes
Business Activity	62.5	Production	59.6
New Orders	60.5	New Orders	58.2
Backlog of Orders	55.5	Backlog of Orders	52.0
New Export Orders	58.5	New Export Orders	51.7
Inventory Change	47.5	Inventories	44.6
Inventory Sentiment	61.5
Imports	58.5	Imports	55.3
Prices	50.5	Prices	43.2
Employment	52.0	Employment	48.0
Supplier Deliveries	52.5	Supplier Deliveries	52.5

* 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 rose to 62.5 percent in March from 57.0 percent in February. This is the highest index since 64.0 percent in May 1998. Respondent comments in March were heavily positive, supporting the index's indication of increased business activity.

Purchasing executives reporting better business in March numbered 35 percent compared to the 27 percent who said things were better in February, and only 10 percent indicated worse business in March compared to 13 percent who said things were worse in February. The industries reporting the highest rates of growth of business activity in March were: Finance and Banking; Public Administration; Insurance; Retail Trade; *Other Services; Communication; and Agriculture.

Business Activity	% Higher	% Same	% Lower	Index
March 1999	35	55	10	62.5
February 1999	27	60	13	57.0
January 1999	29	50	21	54.0
December 1998	22	55	23	49.5
November 1998	26	54	20	53.0
October 1998	27	53	20	53.5

Non-Manufacturing New Orders

NAPM's Non-Manufacturing New Orders Index increased in March compared to February, adding a third month to its uptrend and reaching the highest level since May 1998. NAPM's Non-Manufacturing New Orders Index for March was 60.5 percent compared to February's 56.5 percent. The previous higher mark in May 1998 was 63.5 percent. Comments from respondents included: "Capital projects being released," "Seasonal increase," "New branches opening," and "High level of booked orders."

The industries reporting the highest rates of growth of new orders in March were: Finance and Banking; Insurance; Public Administration; Communications; and Health Services.

New Orders	% Higher	% Same	% Lower	Index
March 1999	33	55	12	60.5
February 1999	25	63	12	56.5
January 1999	27	53	20	53.5
December 1998	21	55	24	48.5
November 1998	26	53	21	52.5
October 1998	26	55	19	53.5

Non-Manufacturing Backlog of Orders

NAPM's Non-Manufacturing Backlog of Orders Index indicated 55.5 percent in March, an increase from February's 51.5 percent and continuing for a second month a reversal of direction after four consecutive months of reduced order backlogs. The March index was the highest since 56.5 percent in August 1998. Purchasing executives' comments on the backlog of orders report included: "Volume of work exceeds capacity," "Reducing backlog is a primary focus area," "Poor vendor performance," and "Increased funding increases numbers of projects." Of the total respondents in March, 24.8 percent indicated they do not measure backlog of orders.

The industries reporting the highest rates of growth of backlog of orders in March were: Retail Trade; Business Services; Public Administration; Construction; and Other Services.

Backlog of Orders	% Higher	% Same	% Lower	Index
March 1999	22	67	11	55.5
February 1999	14	75	11	51.5
January 1999	15	68	17	49.0
December 1998	13	68	19	47.0
November 1998	8	77	15	46.5
October 1998	17	64	19	49.0

Non-Manufacturing Supplier Deliveries

The delivery performance of suppliers to non-manufacturing organizations was somewhat slower in March, and at a higher rate of slowness, than in February. NAPM's Non-Manufacturing Supplier Deliveries Index for March was 52.5 percent compared to February's 51.5 percent. Comments from purchasing executives included: "High demand on suppliers," "Railroad delays" (several mentions), and "Y2K replacement equipment demands."

The industries that reported the highest rates of slower supplier deliveries in March were: Agriculture; Entertainment; Public Administration; Retail Trade; and Wholesale Trade.

Supplier Deliveries	% Higher	% Same	% Lower	Index
March 1999	5	85	10	52.5
February 1999	5	87	8	51.5
January 1999	6	79	15	54.5
December 1998	5	84	11	53.0
November 1998	9	82	9	50.0
October 1998	6	81	13	53.5

Non-Manufacturing New Export Orders

Orders and requests for services and other non-manufacturing activities to be provided outside of the U.S. by U.S. based personnel reversed five months of decreases in March. NAPM's Non-Manufacturing New Export Orders Index was 58.5 percent in March compared to 47.5 percent in February. The March index was the highest since 58.5 percent in March 1998. Of the total respondents in March, 74.9 percent indicated they either do not perform, or do not separately measure, orders for work outside the U.S.

The industries with the highest rates of growth of new export orders in March were: Insurance; Finance and Banking; Retail Trade; Business Services; and Public Administration.

New Export Orders	% Higher	% Same	% Lower	Index
March 1999	22	73	5	58.5
February 1999	10	75	15	47.5
January 1999	14	65	21	46.5
December 1998	12	74	14	49.0
November 1998	10	70	20	45.0
October 1998	10	77	13	48.5

Non-Manufacturing Imports

Use of imported materials by non-manufacturing industries increased in March for the second time after four months of decreases.. NAPM's Non-Manufacturing Imports Index for March was 58.5 percent compared to 51.5 percent in February. The March index was the highest since inception of the NAPM Non-Manufacturing Business Survey in July 1997. In March, 70.1 percent of respondents reported that they do not use or do not track use of imported materials.

The industries with the highest rates of growth of use of imports in March were: Business Services; Public Administration; Retail Trade; Wholesale Trade; Construction; and Agriculture.

Imports	% Higher	% Same	% Lower	Index
March 1999	22	73	5	58.5
February 1999	11	81	8	51.5
January 1999	9	78	13	48.0
December 1998	12	72	16	48.0
November 1998	15	69	16	49.5
October 1998	10	76	14	48.0

Non-Manufacturing Inventory Change

Material inventories maintained by non-manufacturing organizations decreased in March for the third consecutive month. NAPM's Non-Manufacturing Inventories Index registered 47.5 percent in March, compared to 49.5 percent in February. Of the total respondents in March, 21.2 percent indicated they do not have inventories. Comments from member purchasers included: "Increased demand," "Better management of inventory," "New programs to reduce inventory," and "Using up current inventory."

The industries reporting the highest rates of growth of inventories in March were: Transportation; Agriculture; Entertainment; Real Estate; and Construction. The industries reporting the highest rates of inventory decrease in March were: Mining; Business Services; Insurance; Retail Trade; and Wholesale Trade.

Inventory Change	% Higher	% Same	% Lower	Index
March 1999	19	57	24	47.5
February 1999	23	53	24	49.5
January 1999	20	54	26	47.0
December 1998	25	51	24	50.5
November 1998	22	56	22	50.0
October 1998	21	55	24	48.5

Non-Manufacturing Inventory Sentiment

The March NAPM Non-Manufacturing Inventory Sentiment Index of 61.5 percent reflects an increase from the February reading of 60.5 percent. The higher March index of inventory sentiment indicates that non-manufacturing purchasing executives felt slightly more uncomfortable with current levels of inventory and shared the "too high" sentiment to a slightly greater extent in March than in February. In March, 28 percent of members felt their inventories were too high (compared to 29 percent in February). Also in March, 5 percent indicated their inventories were too low, (8 percent in February), and 67 percent said that their inventories were about right (63 percent in February).

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

Inventory Sentiment	% Higher	% Same	% Lower	Index
March 1999	28	67	5	61.5
February 1999	29	63	8	60.5
January 1999	29	64	7	61.0
December 1998	36	57	7	64.5
November 1998	30	66	4	63.0
October 1998	39	53	8	65.5

Non-Manufacturing Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in March for the first time since February 1998. NAPM's Non-Manufacturing Price Index increased to 50.5 percent in March, compared to 46.5 percent in February. March is the first month of price increase after twelve months of either a decrease or no change in prices paid by non-manufacturing industries.

The industries that reported the highest rates of increase in prices paid in March were: Mining; Business Services; Communication; Wholesale Trade; and Agriculture.

Prices	% Higher	% Same	% Lower	Index
March 1999	15	71	14	50.5
February 1999	8	77	15	46.5
January 1999	11	72	17	47.0
December 1998	5	81	14	45.5
November 1998	5	80	15	45.0
October 1998	10	76	14	48.0

Non-Manufacturing Employment

Employment in the non-manufacturing sector reported an increase in March after indicating a low rate of decrease for the past three months. NAPM's Non-Manufacturing Employment Index for March was 52.0 percent compared to 49.5 percent for February. Comments from purchasers included: "Shortage, trained personnel hard to come by," "Adding people to reduce backlog," "Increased business," and "Downsizing and consolidation."

The industries reporting the highest rates of growth of employment in March were: Finance and Banking; Business Services; Communication; Public Administration; Entertainment; and Real Estate.

Employment	% Higher	% Same	% Lower	Index
March 1999	17	70	13	52.0
February 1999	11	77	12	49.5
January 1999	12	75	13	49.5
December 1998	13	73	14	49.5
November 1998	18	69	13	52.5
October 1998	16	73	11	52.5

*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

Copiers and Copier Equipment; Gypsum Board (drywall); Insulation; Labor; Laptop Computers — 2nd month; PC's.

Commodities Reported Up in Price

Corn; Corrugated Containers; Diesel Fuel; Fuel (equal reports of price decreases); Gasoline (some reports of price decreases); Insulation; Pine Lumber — 2nd month; Plywood; Services; Soybean Meal.

Commodities Reported Down in Price

Computers — 11th month; Copper; Fittings; Memory; Paper — 8th month (some reports of price increases); PCs — 15th month; Pipe; Valves.

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 industries 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® will not be available. Several years of data will need to be developed before that type of non-manufacturing indicator could 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 44,000 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. (EDT).

The next Non-Manufacturing NAPM Report On Business® featuring the April 1999 data will be released at 10:00 a.m. (EDT) on May 5, 1999.

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