FOR RELEASE: March 1, 2000
|NAPM Media Relations|
|480/752-6276 ext. 3015|
DO NOT CONFUSE THIS NATIONAL REPORT with the various regional purchasing reports released across the country. The national 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 February 2000.
(Tempe, Arizona) — Economic activity in the manufacturing sector grew for the thirteenth consecutive month in February. The overall economy continued to grow in February for the 106th consecutive month say the nation's purchasing executives in the latest Manufacturing NAPM Report On Business®.
The report was issued today by Norbert J. Ore, C.P.M., chair of the National Association of Purchasing Management's Manufacturing Business Survey Committee and vice president purchasing and strategic alliances, Chesapeake Display and Packaging Company. "The manufacturing sector continued to grow, and the rate of growth is slightly faster than January's. Production and new orders continue to accelerate, with production significantly higher than January. The NAPM Prices Index continues to indicate most manufacturers are paying higher prices for their purchases, and we continue to report growth in manufacturing employment."
NAPM's Backlog of Orders Index rose in February, indicating that the rate of growth in order backlogs is greater than in January, and NAPM's Supplier Deliveries Index once again signals slowing deliveries, though at a slightly slower rate. Manufacturing Employment grew during February as the index rose above the breakeven point (an index of 50) for the tenth consecutive month. NAPM's Price Index continued to strengthen as 17 of 20 industries indicated paying higher prices on average during February. New Export Orders strengthened in February while Imports continue to grow though at a rate just above breakeven (50 percent) and slower than in January. Comments from purchasing managers this month focused on rising prices and higher interest rates. Driven by demand and higher energy costs, the concern is that they will not be able to pass through the price increases. Higher interest rate concerns came primarily from companies working in the construction markets.
NAPM's Purchasing Managers' Index was slightly higher at 56.9 percent in February, up from 56.3 percent in January. NAPM's Production Index increased 5.4 percentage points from 55.9 percent in January to 61.3 percent in February. NAPM's New Orders Index rose 0.1 percentage point from 60.4 percent in January to 60.5 percent in February. NAPM's Backlog of Orders Index registered 54 percent, up 2 percentage points from the 52 percent recorded in January. NAPM's Supplier Deliveries Index is 55 percent in February slightly lower than the 55.2 percent in January. The NAPM Employment Index is at 53.2 percent for February, an increase of 0.5 percentage points when compared to the 52.7 percent reported in January. NAPM's Price Index in February is 74.1 percent, an increase of 1.5 percentage points from January.
NAPM's Inventories Index declined to 45.2 percent, a change of direction indicating inventory liquidation when compared to January. Responding to a special monthly question concerning customers' inventories of products purchased from the purchasers' organizations, 9 percent of the purchasing executives felt they were too high (down from 10 percent in January), while 13 percent felt they were too low (down from 17 percent in January) and 78 percent thought they were about right (up from 73 percent in January).
NAPM's New Export Orders Index continued positive for the thirteenth consecutive month while increasing 3.0 percentage points to 55.6 percent. Imports of materials by manufacturers continued to grow but at a slower rate as NAPM's Imports Index was down from 51.9 percent in January to February's 50.6 percent.
"The overall picture is one of continuing growth in manufacturing activity during the month of February," added Ore. "While growth is still quite strong, the trend for the PMI for the last three months indicates some deceleration in the rate of growth in the sector. February production is increasing at a faster rate while New Orders remained firm and strengthened slightly. The manufacturing sector is quite healthy at this time, but prices are rising at an accelerating rate."
Of the 20 industries in the manufacturing sector, thirteen reported improved business in February. Industries that reported improvement over January were (listed in order): Electronic Components & Equipment; Textiles; Industrial & Commercial Equipment & Computers; Chemicals; Tobacco; Fabricated Metals; Transportation & Equipment; Wood & Wood Products; Primary Metals; Instruments & Photographic Equipment; Rubber & Plastic Products; Furniture; and Paper.
"Capacitors, Memory, and Semiconductors are the only commodities reported on the Short Supply List. Commodities with reports of price increases were Aluminum; Capacitors; Caustic Soda; Corrugated Containers; Diesel; Fuel Oil; Natural Gas; Nickel; Paper; Petroleum; Plastic; Plastic Resins; Resins; Solvents; Stainless Steel; Steel; and Wood Pulp. High Density Polyethylene is the only commodity down in price," Ore stated.
Feb. vs. Jan.
|Rate of Change|
Feb. vs. Jan.
|Backlog of Orders||54.0||Growing||Faster|
|New Export Orders||55.6||Growing||Faster|
The Purchasing Managers' Index (PMI) indicates that the manufacturing economy continued to grow during the month of February with an index of 56.9 percent. This is 0.6 percentage point higher when compared to January and the thirteenth month that the index has been above 50. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.
A PMI in excess of 42.4 percent, over a period of time, generally indicates an expansion of the overall economy. Ore added, "The past relationship between the PMI and the overall economy indicates that the average PMI for the months of January and February (56.6 percent) corresponds to a 5.1 percent annual increase in gross domestic product (GDP). However, if the PMI for February (56.9 percent) turned out to be the annual average for 2000, this would correspond to a 5.2 percent increase in GDP."
|Month||Feb. '00||Jan. '00||Dec. '99||Nov. '99||Oct. '99|
|Month||Sep. '99||Aug. '99||Jul. '99||Jun. '99||May. '99|
|Month||Apr. '99||Mar. '99||Feb. '99||Jan. '99||Dec. '98|
NAPM's Production Index grew at an accelerating rate in February for the fourteenth consecutive month, registering 61.3 percent, an increase of 5.4 percentage points when compared to the January index of 55.9 percent.
An index above 49.4 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures. Industries showing the highest rate of growth in production for February were (listed in order): Textiles; Electronic Components & Equipment; Chemicals; Tobacco; Furniture; Industrial & Commercial Equipment & Computers; Transportation & Equipment; Wood & Wood Products; Fabricated Metals; Rubber & Plastic Products; and Paper.
NAPM's New Orders Index grew at a slightly faster rate in February with an index of 60.5 percent, an increase of 0.1 percentage point when compared to 60.4 percent in January. A New Orders Index above 50.4 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 1987 dollars).
For the month of February, nine industries reported higher rates of increase in new orders. They were (listed in order): Industrial & Commercial Equipment & Computers; Electronic Components & Equipment; Textiles; Tobacco; Chemicals; Fabricated Metals; Primary Metals; Transportation & Equipment; and Instruments & Photographic Equipment.
The Backlog of Orders Index grew at a faster rate in February when compared to January. NAPM's Backlog of Orders Index (not seasonally adjusted) registered 54 percent, an increase of 2 percentage points. Of the 88 percent of respondents, who measure their backlog of orders, 24 percent reported greater backlogs, 16 percent reported smaller backlogs, and 60 percent reported no change from January. Ten industries reported an increase in backlog of orders during the month: Textiles; Electronic Components & Equipment; Industrial & Commercial Equipment & Computers; Apparel; Tobacco; Wood & Wood Products; Primary Metals; Printing & Publishing; Transportation & Equipment; and Fabricated Metals.
NAPM's Supplier Deliveries Index in February indicates delivery performance continued to slow, but at a decelerating rate, with an index reading of 55 percent (a reading below 50 indicates faster delivery performance). The index is 0.2 percentage points lower than January's 55.2 percent. February marks the tenth consecutive month that the index has registered above 50. The industries reporting slower supplier deliveries in February were: Instruments & Photographic Equipment; Petroleum; Electronic Components & Equipment; Printing & Publishing; Chemicals; Primary Metals; Industrial & Commercial Equipment & Computers; and Fabricated Metals.
NOTE: A list of commodities in short supply is available at the end of this report.
Manufacturers have apparently begun the liquidation of Y2K related inventories as the Inventories Index registered 45.2 percent, down from 53.4 percent in January.
An Inventories Index greater than 41.1 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis' (BEA) figures on overall manufacturing inventories (constant 1987 dollars). The four industries reporting higher inventories in February over January were: Rubber & Plastic Products; Electronic Components & Equipment; Transportation & Equipment; and Food.
NAPM's Manufacturing Employment Index continued above 50 in February for the tenth consecutive month. The index registered 53.2 percent in February compared to 52.7 percent in January, an increase of 0.5 percentage point. An Employment Index above 47.2 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment. Seven industries indicated growth in employment and they were: Furniture; Textiles; Electronic Components & Equipment; Industrial & Commercial Equipment & Computers; Chemicals; Transportation & Equipment; and Fabricated Metals.
NAPM's Price Index is 74.1 percent in February, 1.5 percentage points higher than the 72.6 percent recorded for January. Manufacturers continue to pay higher prices as the Index has been above 50 percent for ten consecutive months, with the last six months above 60 percent. In February, 47 percent of purchasing executives reported paying higher prices and 4 percent reported paying lower prices, while 49 percent reported that prices were unchanged from the preceding month.
A Price Index below 46.3 percent, over time, is generally consistent with a decrease in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices. The seventeen industries paying higher prices were: Apparel; Petroleum; Textiles; Transportation & Equipment; Electronic Components & Equipment; Rubber & Plastic Products; Paper; Glass, Stone & Aggregate; Chemicals; Fabricated Metals;
Instruments & Photographic Equipment; Printing & Publishing; Industrial & Commercial Equipment & Computers; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Food; Wood & Wood Products; and Primary Metals.
NOTE: A list of commodities up in price and down in price is available at the end of this report.
NAPM's New Export Orders Index for February continued positive (an index exceeding 50 percent) for the thirteenth consecutive month. NAPM's New Export Orders Index rose 3.0 percentage points to 55.6 percent for the month of February. Industries reporting growth in new export orders in February were: Rubber & Plastic Products; Electronic Components & Equipment; Chemicals; Fabricated Metals; Transportation & Equipment; and Industrial & Commercial Equipment & Computers.
Imports of materials by manufacturers grew in February, but at a slower rate, with an index of 50.6 percent. The Imports Index is 1.3 percentage points lower than January's report of 51.9 percent. The six industries reporting growth in import activity for February were: Furniture; Instruments & Photographic Equipment; Industrial & Commercial Equipment & Computers; Fabricated Metals; Electronic Components & Equipment; and Chemicals.
Average commitment leadtime for Capital Expenditures declined 4 days to 114 days in February. Average leadtime for Production Materials rose 1 day to 47 days. Average leadtime for Maintenance, Repair, and Operating (MRO) supplies is unchanged at 26 days.
Capacitors; Memory; and Semiconductors
Aluminum — 10th month; Capacitors; Caustic Soda — 6th month; Corrugated Containers — 12th month; Diesel — 2nd month; Fuel Oil; Natural Gas — 2nd month; Nickel; Paper — 9th month; Petroleum; Plastic — 4th month; Plastic Resins — 2nd month; Resins — 6th month; Solvents — 2nd month; Stainless Steel — 7th month; Steel — 7th month; and Wood Pulp — 2nd month.
High Density Polyethylene.
The Manufacturing NAPM Report On Business® is based on data compiled from monthly replies to questions asked of purchasing executives in over 350 industrial companies. Membership of the Business Survey Committee is diversified by Standard Industrial Classification (SIC) category, based on each industry's contribution to Gross Domestic Product (GDP). Twenty industries from various U.S. geographical areas are represented on the committee.
Survey responses reflect the change, if any, in the current month compared to the previous month. For each of the indicators measured (New Orders, Backlog of Orders, New Export Orders, Imports, Production, Supplier Deliveries, Inventories, Employment, and Prices), this report shows the percentage reporting each response, the net difference between the number of responses in the positive economic direction (higher, better, and slower for Supplier Deliveries) and the negative economic direction (lower, worse, and faster for Supplier Deliveries), and the diffusion index. Responses are raw data and are never changed. The diffusion index includes the percent of positive responses plus one-half of those responding the same (considered positive).
The resulting single index number is then seasonally adjusted to allow for the effects of repetitive intrayear variations resulting primarily from normal differences in weather conditions, various institutional arrangements, and differences attributable to nonmoveable holidays. All seasonal adjustment factors are supplied by the U.S. Department of Commerce and are subject annually to relatively minor changes when conditions warrant them. The PMI is a composite index based on the seasonally adjusted diffusion indices for five of the indicators (New Orders, Production, Supplier Deliveries, Inventories, and Employment) with varying weights.
Diffusion indices have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change and the scope of change. A PMI reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent that it is generally declining. A PMI over 42.4 percent, over a period of time, indicates that the overall economy, or Gross Domestic Product (GDP), is generally expanding, below 42.4 percent, that it is generally declining. The distance from 50 percent or 42.4 percent is indicative of the strength of the expansion or decline. With some of the indicators within this report, NAPM has indicated the departure point between expansion and decline of comparable government series, as determined by regression analysis.
Responses to Buying Policy reflect the percent reporting the current month's leadtime, the approximate weighted number of days ahead for which commitments are made for Production Materials, Capital Expenditures, and Maintenance, Repair, and Operating (MRO) Supplies, expressed as hand-to-mouth (five days), 30 days, 60 days, 90 days, six months (180 days), a year or more (360 days), and the weighted average number of days. These responses are raw data, never revised, and not seasonally adjusted since there is no significant seasonal pattern.
The 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 48,000 members in the United States and Puerto Rico. The report has been issued by the association since 1931, except for a four year interruption during World War II.
The full text version of the Manufacturing NAPM Report On Business® is posted on NAPM's Web site at www.ism.ws on the first business day of every month after 10:10 a.m. (ET).
The next Manufacturing NAPM Report On Business® featuring the March 2000 data will be released at 10:00 a.m. (ET) on April 3, 2000.