FOR RELEASE: March 1, 2001
|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 2001.
(Tempe, Arizona) — Economic activity in the manufacturing sector declined in February for the seventh consecutive month. The overall economy failed to grow in February for the second 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 group director, strategic sourcing and procurement, Georgia-Pacific Corporation. "The manufacturing sector continued to contract in February. However, it is encouraging that we see slowing in the rate of decline in six of the nine indexes. This could be an indication that the manufacturing sector bottomed in January, though we must caution that it takes more than one month's data to make that determination. Bright spots were New Orders and Backlog of Orders which though still declining, slowed significantly in their rate of decline."
NAPM's Backlog of Orders Index indicates that order backlogs declined for the 10th consecutive month. NAPM's Supplier Deliveries Index reflects that deliveries are slower. Manufacturing employment declined in February as the index fell below the breakeven point (an index of 50 percent) for the fifth consecutive month. NAPM's Prices Index remained above 50 as manufacturers continue to experience price increases, a market condition that has existed for 22 consecutive months. New Export Orders failed to grow in February as the index once again fell below 50 percent. February's Imports Index failed to grow for the second consecutive month. Comments from purchasing managers this month continued to express concern for the first half of the year. Major concerns were spread among many industries with the automotive and construction industries experiencing reduced activity. At the same time, the food industry appears to be doing well with some resurgence in agricultural equipment.
NAPM's Purchasing Managers' Index is 41.9 percent in February, an increase of 0.7 percentage point from the 41.2 percent reported in January. NAPM's Production Index rose 1.8 percentage points in February. NAPM's New Orders Index rose 3 percentage points from 37.8 percent in January to 40.8 percent in February. NAPM's Backlog of Orders Index registered 37 percent, indicating smaller backlogs for the 10th consecutive month. NAPM's Supplier Deliveries Index is 51.3 percent in February, indicating slower deliveries during the month. The NAPM Employment Index is at 37.2 percent for February, a decrease of 5.8 percentage points when compared to the 43 percent reported in January. NAPM's Prices Index in February is 58.1 percent, a decrease of 7.6 percentage points from January's 65.7 percent.
NAPM's Inventories Index is at 45.7 percent indicating a slower rate of inventory liquidation when compared to January's 42.2 percent. Responding to a special monthly question concerning customers' inventories of products purchased from the purchasers' organizations, 22 percent of the purchasing executives felt they were too high (down from 26 percent in January), while 17 percent felt they were too low (up from 14 percent in January) and 61 percent thought they were about right (up from 60 percent in January). NAPM's New Export Orders Index registered 47.6 percent, up from January's 46.1 percent. Imports of materials by manufacturers declined as NAPM's Imports Index is 46.5 percent in February, down from January's 48.9 percent.
"The overall picture is one of continued decline in manufacturing activity during the month of February," added Ore. "The manufacturing sector definitely lacks momentum. While volumes are falling, many industries are still experiencing upward price pressures driven primarily by energy costs. The reduction in employment accelerated during the month.
Of the 20 industries in the manufacturing sector, only Tobacco and Food reported improved business in February.
"Capacitors — Tantalum, Caustic Soda, Coal, Electronic Components, and Natural Gas are the commodities reported on the Short Supply List. Commodities with reports of price increases are: Aluminum; Capacitors — Tantalum; Caustic Soda; Chemicals; Coal; Energy; Gasoline; Glass; Natural Gas (also shown down in price); Plastic; Resins; and Vanilla Flavor. Corrugated Containers; Linerboard; Natural Gas (also shown up in price); Stainless Steel; and Steel are the commodities reported down in price," Ore stated.
Feb vs Jan
|Rate of Change|
Feb vs Jan
|Backlog of Orders||37.0||Contracting||Slower|
|New Export Orders||47.6||Contracting||Slower|
The Purchasing Managers' Index (PMI) indicates that the manufacturing economy failed to grow during the month of February with an index of 41.9 percent. This is the seventh consecutive month that the manufacturing sector has failed to grow. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally
A PMI in excess of 42.7 percent, over a period of time, generally indicates an expansion of the overall economy. This is the second month that the overall economy has failed to grow according to the PMI after a record 116 consecutive months of growth.
Ore added, "The past relationship between the PMI and the overall economy indicates that the average PMI for the months of January and February (41.6 percent) corresponds to a -0.4 percent annual decrease in real gross domestic product (GDP). However, if the PMI for February (41.9 percent) turned out to be the annual average for 2001, this would correspond to a -0.3 percent decrease in GDP."
NAPM's Production Index rose to 39.7 percent in February up from 37.9 percent in January. This is the third consecutive month (and fifth of the last seven) that the index has fallen below 50 percent. Of the 20 industries, only Food reported growth in February. An index above 49.4 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures.
NAPM's New Orders Index failed to grow in February for the eighth consecutive month. The index is at 40.8 percent representing an increase of 3 percentage points when compared to January's 37.8 percent. A New Orders Index above 50.3 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, three industries reported higher rates of increase in new orders. They were (listed in order): Printing & Publishing; Electronic Components & Equipment; and Food.
The Backlog of Orders Index failed to grow for the 10th consecutive month in February. NAPM's Backlog of Orders Index (not seasonally adjusted) registered 37 percent evidencing a slower rate of decline in manufacturers' backlogs. Of the 90 percent of respondents who measure their backlog of orders, 13 percent reported greater backlogs, 39 percent reported smaller backlogs, and 48 percent reported no change from January. There were no reports of increases in backlog of orders during the month.
NAPM's Supplier Deliveries Index in February indicates delivery performance is slowing at an accelerating rate when compared to January. At 51.3 percent, the index is 1 percentage points higher than January's 50.3 percent. The industries reporting slower supplier deliveries in February were: Textiles; Instruments & Photographic Equipment; Rubber & Plastic Products; Paper; and Industrial & Commercial Equipment & Computers.
NOTE: A list of commodities in short supply is available at the end of this report.
Manufacturers' inventories are still being liquidated as the Inventories Index registered 45.7 percent, up from 42.2 percent in January. The Inventories Index has been under 50 percent for 13 consecutive months. An Inventories Index greater than 41.3 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis' (BEA) figures on overall manufacturing inventories (constant 1987 dollars). The six industries reporting higher inventories in February over January were: Tobacco; Instruments & Photographic Equipment; Electronic Components & Equipment; Food; Industrial & Commercial Equipment & Computers; and Chemicals.
NAPM's Manufacturing Employment Index fell below 50 percent in February for the fifth consecutive month. The index registered 37.2 percent in February compared to 43 percent in January, a decrease of 5.8 percentage points.
An Employment Index above 47.5 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment. Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments) and Petroleum were the only industries indicating growth in employment during the month.
NAPM's Prices Index indicates manufacturers continued to pay higher prices in February. With the index at 58.1 percent, there is deceleration in the rate of increase as the index is 7.6 percentage points lower than January's 65.7 percent. In February 27 percent of purchasing executives reported paying higher prices and 16 percent reported paying lower prices, while 57 percent reported that prices were unchanged from the preceding month.
A Prices Index below 46.4 percent, over time, is generally consistent with a decrease in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices. The 11 industries paying higher prices were: Petroleum; Tobacco; Glass, Stone & Aggregate; Paper; Textiles; Food; Electronic Components & Equipment; Transportation & Equipment; Chemicals; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); and Wood & Wood Products.
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 registered 47.6 percent, 1.5 percentage points higher than January's index of 46.1 percent. This is the fifth consecutive month that the New Export Orders Index has been below 50 percent. Industries reporting growth in new export orders in February were: Printing & Publishing; Petroleum; Wood & Wood Products; and Food.
Imports of materials by manufacturers declined in February as the Imports Index registered 46.5 percent, a 2.4 percentage points decrease when compared to January's report of 48.9 percent. The five industries reporting growth in import activity for February were: Leather; Printing & Publishing; Furniture; Textiles; and Food.
Average commitment leadtime for Capital Expenditures declined 8 days to 110 days. Average leadtime for Production Materials declined 5 days to 43 days. Average leadtime for Maintenance, Repair, and Operating (MRO) supplies declined 1 day to 23 days.
Capacitors - Tantalum — 2nd month; Caustic Soda — 6th month; Coal; Electronic Components — 6th month; and Natural Gas — 2nd month.
Aluminum; Capacitors - Tantalum; Caustic Soda — 8th month; Chemicals — 2nd month; Coal; Energy; Gasoline — 2nd month; Glass; Natural Gas — 14th month (also shown down in price); Plastic; Resins — 18th month; and Vanilla Flavor.
Corrugated Containers; Linerboard; Natural Gas (also shown up in price); Stainless Steel — 3rd month; and Steel — 9th month.
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 42.7 percent, over a period of time, indicates that the overall economy, or Gross Domestic Product (GDP), is generally expanding, below 42.7 percent, that it is generally declining. The distance from 50 percent or 42.7 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 181 affiliates with more than 45,000 members in the United States. 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 2001 data will be released at 10:00 a.m. (ET) on April 2, 2001.