FOR RELEASE: February 3, 1999

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

Non-Manufacturing Business Activity Grows in January 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 January 1999.

Business Activity Index at 54.0%

New Orders Increase
Backlog of Orders, Exports, Imports Decrease

(Tempe, Arizona) — Business in the non-manufacturing sector grew in January 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 January, NAPM's Non-Manufacturing Business Activity Index indicated increased activity compared to December, supporting a long-term growth trend and indicating that December's report of slight business activity contraction was likely due to seasonal factors," Kauffman said. "New Orders also increased in January, Backlog of Orders decreased, and Supplier Deliveries were slower than in December. Inventories of non-manufacturing firms shrank, and New Export Orders and use of Imports decreased for the fourth consecutive month. Prices paid by non-manufacturing organizations for materials and services decreased at a slower rate in January, and the Non-Manufacturing Inventory Sentiment Index indicated that purchasing executives are feeling less uncomfortable with the current level of inventories in January," Kauffman said.

"NAPM's Non-Manufacturing Business Activity Index indicated increased business activity by rebounding from 49.5 percent in December to 54.0% in January. Comments from purchasing executives are mixed, but generally positive on business activity in January. Increased business activity in January was reported by 29 percent of purchasers compared to 22 percent who reported increased business in December. Also in January, of the industry groups reporting in the NAPM non-manufacturing survey, nine indicated increased activity, six indicated decreased activity, and one reported no change in activity level. In December, six industry groups reported increased activity, nine indicated decreased activity, and one advised no change," said Kauffman.

Other significant indicators in January include new orders, inventories, and prices. NAPM's New Orders Index indicated increased new orders in January after reporting a decrease in December. NAPM's Inventories Index indicated decreased inventories by registering 47 percent, its second-lowest level since the inception of NAPM's non-manufacturing survey.

NAPM's Price Index also indicated continuing price decreases but at a reduced rate of decrease in January compared to November and December. One purchaser reported that many suppliers that usually have annual price increases are holding at the 1998 level in 1999. These indications collectively project a non-manufacturing sector that is growing but at a slower rate of growth than the average for 1998 — NAPM's Non-Manufacturing Business Activity Index for January is 54.0 percent compared to the 57.3 percent average for the same index for all of 1998.

"Overall in January, non-manufacturing industries reported increased business activity and higher levels of new orders. Concerns of purchasing executives in non-manufacturing industries in January include continued inventory reduction efforts and ability to find qualified personnel," Kauffman commented.

NAPM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE

Series	January Indexes	December Indexes	Jan. vs. Dec. Index Change	Direction and Rate of Change
Business Activity	54.0	49.5	+4.5	Increase from Decrease
New Orders	53.5	48.5	+5.0	Increase from Decrease
Backlog of Orders	49.0	47.0	+2.0	Decreasing Slower
New Export Orders	46.5	49.0	-2.5	Decreasing Faster
Inventory Change	47.0	50.5	-3.5	Decrease from Increase
Inventory Sentiment	61.0	64.5	-3.5	Lesser feeling of "too high"
Imports	48.0	48.0	0.0	Decreasing at Same Rate
Prices	47.0	45.5	+1.5	Decreasing Slower
Employment	49.5	49.5	0.0	Decreasing at Same Rate
Supplier Deliveries	54.5	53.0	+1.5	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 January 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 declined in both non-manufacturing and manufacturing, with a faster rate of decline in manufacturing. Prices declined in both areas of economic activity in January with the manufacturing sector reporting a more rapid rate of decrease. Inventories decreased in both non-manufacturing and manufacturing industries, with a faster rate of decrease in manufacturing. New export orders also decreased in both sectors in January, with non-manufacturing experiencing a more rapid rate of decrease. Supplier delivery performance in January was reported to be slower than in December by both sectors but with a greater rate of slowness in non-manufacturing. Use of Imports was down in both the non-manufacturing and manufacturing sectors, but declined at a faster rate in non-manufacturing.

Non-Manufacturing Survey Questions	Indexes	Manufacturing Survey Questions	Indexes
Business Activity	54.0	Production	53.1
New Orders	53.5	New Orders	51.3
Backlog of Orders	49.0	Backlog of Orders	38.0
New Export Orders	46.5	New Export Orders	49.8
Inventory Change	47.0	Inventories	42.3
Inventory Sentiment	61.0
Imports	48.0	Imports	49.4
Prices	47.0	Prices	32.5
Employment	49.5	Employment	44.8
Supplier Deliveries	54.5	Supplier Deliveries	50.9

* 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 54.0 percent in January from 49.5 percent in December. This indicates an increase in business activity in the non-manufacturing sector in January 1999 compared to December 1998. Respondent comments in January were mixed but, on balance, indicating increased business activity. Many purchasers' comments indicated that the lessened activity in December was due to seasonal factors.

Respondents reporting better business in January numbered 29 percent compared to the 22 percent who said things were better in December. The industries reporting the highest rates of growth of business activity in January were: Utilities; Health Services; Public Administration; Insurance; Business Services; and Communication.

Business Activity	% Higher	% Same	% Lower	Index
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
September 1998	32	54	14	59.0
August 1998	24	56	20	52.0
July 1998	33	49	18	57.5
June 1998	37	49	14	61.5
May 1998	40	48	12	64.0
April 1998	38	50	12	63.0
March 1998	31	57	12	59.5
February 1998	34	49	17	58.5

Non-Manufacturing New Orders

NAPM's Non-Manufacturing New Orders Index increased in January compared to December. NAPM's Non-Manufacturing New Orders Index for January was 53.5 percent compared to December's 48.5 percent. Comments from respondents included: "Capital funds available," "Busy season," "Received new contracts," and "New year, new budget."

The industries reporting the highest rates of growth of new orders in January were: Agriculture; Utilities; Health Services; Public Administration; Business Services; and Communication.

New Orders	% Higher	% Same	% Lower	Index
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
September	30	54	16	57.0
August 1998	29	53	18	55.5
July 1998	29	52	19	55.0
June 1998	33	52	15	59.0
May 1998	38	51	11	63.5
April 1998	38	47	15	61.5
March 1998	28	59	13	57.5
February 1998	31	56	13	59.0

Non-Manufacturing Backlog of Orders

NAPM's Non-Manufacturing Backlog of Orders Index indicated 49.0 percent in January, an increase from December's 47.0 percent and the fourth consecutive month of reduced order backlogs. Purchasing executives' comments on this month's backlog of orders report included: "Working off backlog," "New requests slowed, allowing backlog to clear," "Lack of capital spending," and "Received new contracts." Of the total respondents in January, 26.2 percent indicated they do not measure backlog of orders.

The five industries reporting growth of backlog of orders in January were: Agriculture; Communication; *Other Services; Public Administration; and Wholesale Trade.

Backlog of Orders	% Higher	% Same	% Lower	Index
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
September 1998	19	70	11	54.0
August 1998	24	65	11	56.5
July 1998	21	62	17	52.0
June 1998	17	66	17	50.0
May 1998	22	62	16	53.0
April 1998	15	72	13	51.0
March 1998	15	73	12	51.5
February 1998	14	75	11	51.5

Non-Manufacturing Supplier Deliveries

The delivery performance of suppliers to non-manufacturing organizations was slower in January than in December. NAPM's Non-Manufacturing Supplier Deliveries Index for January was 54.5 percent compared to December's 53.0 percent. Comments from purchasing executives included: "Suppliers are backordered," "Catching up from holiday effects," and "Some weather problems."

The industries that reported the highest rates of slower supplier deliveries in January were: Retail Trade; Agriculture; Transportation; Wholesale Trade; Entertainment; and Construction.

Supplier Deliveries	% Higher	% Same	% Lower	Index
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
September 1998	5	84	11	53.0
August 1998	6	80	14	54.0
July 1998	5	81	14	54.5
June 1998	5	83	12	53.5
May 1998	8	83	9	50.5
April 1998	5	86	9	52.0
March 1998	4	87	9	52.5
February 1998	3	90	7	52.0

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 decreased for the fourth consecutive month in January, and at a faster rate of decrease than reported in December. NAPM's Non-Manufacturing New Export Orders Index was 46.5 percent in January compared to 49.0 percent in December. Of the total respondents in January, 79.1 percent indicated they either do not perform, or do not separately measure, orders for work outside the U.S.

The three industries with growth of new export orders in January were: Retail Trade; Business Services; and Wholesale Trade.

New Export Orders	% Higher	% Same	% Lower	Index
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
September 1998	12	84	4	54.0
August 1998	19	70	11	54.0
July 1998	16	71	13	51.5
June 1998	23	64	13	55.0
May 1998	20	57	23	48.5
April 1998	27	59	14	56.5
March 1998	24	69	7	58.5
February 1998	19	65	16	51.5

Non-Manufacturing Imports

Use of imported materials by non-manufacturing industries decreased for the fourth consecutive month in January and at the same rate of decrease as in December. NAPM's Non-Manufacturing Imports Index for both January and December was 48.0 percent. In January, 73.2 percent of respondents reported that they do not use or do not track use of imported materials.

The only industry that indicated increased use of imports in January was Agriculture.

Imports	% Higher	% Same	% Lower	Index
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
September 1998	16	77	7	54.5
August 1998	16	78	6	55.0
July 1998	13	79	8	52.5
June 1998	21	70	9	56.0
May 199	18	72	10	54.0
April 1998	13	80	7	53.0
March 1998	14	78	8	53.0
February 1998	14	76	10	52.0

Non-Manufacturing Inventory Change

Material inventories maintained by non-manufacturing organizations decreased in January. NAPM's Non-Manufacturing Inventories Index registered 47.0 percent in January, compared to 50.5 percent in December. The only incidence of an Inventory Change Index lower than January's 47.0 percent since the beginning of NAPM's non-manufacturing business survey, was 46.5 percent in October 1997. Of the total respondents in January, 25.2 percent indicated they do not have inventories. Comments from respondents included: "Inventories reflect lower activity level," "Inventory reductions at year end," "Company policy to lower inventory," and "Inventory reduction efforts."

The four industries reporting growth of inventories in January were: Insurance; Health Services; Public Administration; and Wholesale Trade. The industries reporting the highest rates of inventory decrease in January were: Communication; Real Estate; Retail Trade; Entertainment; Business Services; and Construction.

Inventory Change	% Higher	% Same	% Lower	Index
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
September 1998	21	59	20	50.5
August 1998	19	58	23	48.0
July 1998	21	54	25	48.0
June 1998	20	59	21	49.5
May 1998	21	58	21	50.0
April 1998	27	51	22	52.5
March 1998	23	59	18	52.5
February 1998	21	59	20	50.5

Non-Manufacturing Inventory Sentiment

The January NAPM Non-Manufacturing Inventory Sentiment Index of 61.0 percent reflects a decrease of 3.5 percentage points from the December reading of 64.5 percent. The lower January index of inventory sentiment indicates that non-manufacturing purchasing executives felt less uncomfortable with current levels of inventory and shared the "too high" sentiment to a lesser extent in January than in December. In January, 29 percent of members felt their inventories were too high (36 percent in December). Also in January, seven percent indicated their inventories were too low, (compared to seven percent also in December), and 64 percent said that their inventories were about right (57 percent in December).

The industries that reported the highest rates of feeling that their inventories were "too high" in January were: Mining; Wholesale Trade; Communication; Entertainment; Finance and Banking; Health Services; and Utilities.

Inventory Sentiment	% Higher	% Same	% Lower	Index
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
September 1998	36	58	6	65.0
August 1998	34	57	9	62.5
July 1998	30	61	9	60.5
June 1998	40	58	2	69.0
May 1998	34	59	7	63.5
April 1998	38	57	5	66.5
March 1998	31	66	3	64.0
February 1998	26	67	7	59.5

Non-Manufacturing Prices

Prices paid by non-manufacturing organizations for purchased materials and services decreased at a slower rate in January than in December. NAPM's Non-Manufacturing Price Index increased to 47.0 percent in January, compared to 45.5 percent in December. January marks the eleventh month of either a decrease or no change in prices paid by non-manufacturing industries after eight consecutive months of price increases.

The four industries reporting higher prices paid in January were: Mining; Retail Trade; Business Services; and Health Services.

Prices	% Higher	% Same	% Lower	Index
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
September 1998	5	79	16	44.5
August 1998	10	78	12	49.0
July 1998	9	76	15	47.0
June 1998	9	74	17	46.0
May 1998	10	76	14	48.0
April 1998	10	80	10	50.0
March 1998	10	78	12	49.0
February 1998	15	75	10	52.5

Non-Manufacturing Employment

Employment in the non-manufacturing sector decreased in January for only the second time since the inception of the NAPM non-manufacturing business survey in July 1997. NAPM's Non-Manufacturing Employment Index for January was 49.5 percent, the same as for December. Comments from purchasers included: "Losing programmers to Y2K projects, cannot find qualified replacements," "Outsourcing — reduced in-house personnel," and "Added employees for new branches opened."

The industries reporting the highest rates of growth of employment in January were: Agriculture; Transportation; Business Services; Health Services; Communication; and Finance and Banking. The industries reporting the highest rates of employment decrease in January were: Insurance; Entertainment; Wholesale Trade; and Real Estate.

Employment	% Higher	% Same	% Lower	Index
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
September 1998	16	72	12	52.0
August 1998	15	74	11	52.0
July 1998	24	62	14	55.0
June 1998	22	65	13	54.5
May 1998	21	66	13	54.0
April 1998	18	70	12	53.0
March 1998	21	68	11	55.0
February 1998	20	64	16	52.0

*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.

January 1999 Non-Manufacturing Report Continued ...