FOR RELEASE: April 3, 2000
|NAPM Media Relations|
|602/752-6276 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 March 2000.
(Tempe, Arizona) — Economic activity in the manufacturing sector grew for the 14th consecutive month in March. The overall economy continued to grow in March for the 107th 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 continues to grow, though the rate of growth is slightly slower in March than in February. While Production continues to accelerate, the rate of growth in New Orders slowed during the month. The NAPM Prices Index continues to indicate manufacturers are paying higher prices for their purchases. Manufacturing employment is still growing, but the rate of growth is slower than in February."
NAPM's Backlog of Orders Index declined in March, indicating that the rate of growth in order backlogs is less than in February. NAPM's Supplier Deliveries Index once again signals slowing deliveries, though at a slightly slower rate. Manufacturing Employment grew during March as the index rose above the breakeven point (an index of 50) for the 11th consecutive month. NAPM's Price Index continued to strengthen as 17 of 20 industries indicated paying higher prices on average during March. New Export Orders continued strong in March. Imports gained momentum in March, posting the highest level since September 1999. Comments from purchasing managers this month focused on rising prices. Pricing power is strong in many segments, particularly energy where the impact is felt through higher raw materials prices, fuel costs, and freight surcharges. A number of respondents expressed concern that escalating energy-related costs may slow the economy.
NAPM's Purchasing Managers' Index was slightly lower at 55.8 percent in March, down from 56.9 percent in February. NAPM's Production Index increased 0.5 percentage point from 61.3 percent in February to 61.8 percent in March. NAPM's New Orders Index declined 3.6 percentage points from 60.5 percent in February to 56.9 percent in March. NAPM's Backlog of Orders Index registered 51 percent, down 3 percentage points from the 54 percent recorded in February. NAPM's Supplier Deliveries Index is 54.1 percent in March, slightly lower than the 55 percent recorded in February. The NAPM Employment Index is at 51.5 percent for March, a decrease of 1.7 percentage points when compared to the 53.2 percent reported in February. NAPM's Price Index in March is 79.8 percent, an increase of 5.7 percentage points from February's 74.1 percent.
NAPM's Inventories Index rose to 48.4 percent indicating a slower rate of inventory liquidation when compared to February. Responding to a special monthly question concerning customers' inventories of products purchased from the purchasers' organizations, 10 percent of the purchasing executives felt they were too high (up from 9 percent in February), while 14 percent felt they were too low (up from 13 percent in February) and 76 percent thought they were about right (down from 78 percent in February).
NAPM's New Export Orders Index continued positive for the 14th consecutive month while registering a slight decrease of 0.3 percentage point to 55.3 percent. Imports of materials by manufacturers continued to grow and at a faster rate as NAPM's Imports Index is 54.9 percent in March, up from February's 50.6 percent.
"The overall picture is one of continuing growth in manufacturing activity during the month of March," added Ore. "While growth is still quite strong, the PMI trend for the last five months indicates deceleration in the rate of growth which could be viewed as quite positive in that we find prices are currently increasing at an alarmingly accelerating rate."
Of the 20 industries in the manufacturing sector, 17 reported improved business in March. Industries that reported improvement over February were (listed in order): Furniture; Instruments & Photographic Equipment; Petroleum; Electronic Components & Equipment; Textiles; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Fabricated Metals; Apparel; Tobacco; Transportation & Equipment; Chemicals; Industrial & Commercial Equipment & Computers; Wood & Wood Products; Food; Primary Metals; Printing & Publishing; and Rubber & Plastic Products.
"Capacitors; Electronics; Laptop Computers; Memory; and Styrene are the commodities reported on the Short Supply List. Commodities with reports of price increases were Adhesives; Aluminum; Capacitors; Chemicals; Copper; Corrugated Containers; Diesel; Electronics; Ethylene; Freight; Fuel Oil; Gasoline; Linerboard; Lubricants; Lumber; Natural Gas; Nickel; Paper; Petroleum Products; Plastic; Plastic Resins; Polyester; High Density Polyethylene; Polyethylene; Polypropylene; Resins; Solvents; Stainless Steel; Steel; and Wood Pulp. No commodities were reported down in price," Ore stated.
Mar vs Feb
|Rate of Change|
Mar vs Feb
|Backlog of Orders||51.0||Growing||Slower|
|New Export Orders||55.3||Growing||Slower|
The Purchasing Managers' Index (PMI) indicates that the manufacturing economy continued to grow during the month of March with an index of 55.8 percent. This is 1.1 percentage points lower when compared to February and the 14th 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 through March (56.3 percent) corresponds to a 5 percent annual increase in real gross domestic product (GDP). However, if the PMI for March (55.8 percent) turned out to be the annual average for 2000, this would correspond to a 4.8% increase in GDP."
NAPM's Production Index grew at a slightly accelerating rate in March for the 15th consecutive month, registering 61.8 percent, an increase of 0.5 percentage point when compared to the February index of 61.3 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 March were (listed in order): Furniture; Tobacco; Textiles; Instruments & Photographic Equipment; Electronic Components & Equipment; Apparel; Transportation & Equipment; Chemicals; Petroleum; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Fabricated Metals; Industrial & Commercial Equipment & Computers; Primary Metals; Wood & Wood Products; Food; and Rubber &Plastic Products.
NAPM's New Orders Index grew at a slower rate in March with an index of 56.9 percent, a decrease of 3.6 percentage points when compared to 60.5 percent in February. 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 March, 15 industries reported higher rates of increase in new orders. They were (listed in order): Furniture; Instruments & Photographic Equipment; Textiles; Apparel; Fabricated Metals; Tobacco; Petroleum; Transportation & Equipment; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Chemicals; Electronic Equipment & Components; Wood & Wood Products; Food; Rubber & Plastic Products; and Industrial & Commercial Equipment & Computers.
The Backlog of Orders Index grew at a slower rate in March when compared to February. NAPM's Backlog of Orders Index (not seasonally adjusted) registered 51 percent, a decrease of 3 percentage points. Of the 89 percent of respondents, who measure their backlog of orders, 21 percent reported greater backlogs, 19 percent reported smaller backlogs, and 60 percent reported no change from February. Eight industries reported an increase in backlog of orders during the month: Leather; Wood & Wood Products; Furniture; Fabricated Metals; Electronic Components & Equipment; Apparel; Textiles; and Transportation & Equipment.
NAPM's Supplier Deliveries Index in March indicates delivery performance continued to slow, but at a decelerating rate, with an index reading of 54.1 percent (a reading below 50 indicates faster delivery performance). The index is 0.9 percentage point lower than February's 55 percent. March marks the 11th consecutive month that the index has registered above 50. The industries reporting slower supplier deliveries in March were: Petroleum; Electronic Components & Equipment; Wood & Wood Products; Industrial & Commercial Equipment & Computers; Fabricated Metals; Paper; Primary Metals; Instruments & Photographic Equipment; Printing & Publishing; and Transportation & Equipment.
NOTE: A list of commodities in short supply is available at the end of this report.
Manufacturers inventories are still being liquidated, but at a relatively slow pace as the Inventories Index registered 48.4 percent, up from 45.2 percent in February.
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 seven industries reporting higher inventories in March over February were: Furniture; Printing & Publishing; Apparel; Fabricated Metals; Instruments & Photographic Equipment; Electronic Components & Equipment; and Transportation & Equipment.
NAPM's Manufacturing Employment Index continued above 50 in March for the 11th consecutive month. The index registered 51.5 percent in March compared to 53.2 percent in February, a decrease of 1.7 percentage points. 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: Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Electronic Components & Equipment; Petroleum; Fabricated Metals; Instruments & Photographic Equipment; Transportation & Equipment; and Industrial & Commercial Equipment & Computers.
NAPM's Price Index is 79.8 percent in March, 5.7 percentage points higher than the 74.1 percent recorded for February, and the highest for this index since February 1995 (81.7 percent). Manufacturers continue to pay higher prices as the Index has been above 50 percent for 11 consecutive months, with the last seven months above 60 percent. In March, 58 percent of purchasing executives reported paying higher prices and 4 percent reported paying lower prices, while 38 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 17 industries paying higher prices were: Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Glass, Stone & Aggregate; Textiles; Chemicals; Rubber &Plastic Products; Instruments & Photographic Equipment; Petroleum; Electronic Components & Equipment; Fabricated Metals; Paper; Transportation & Equipment; Printing & Publishing; Apparel; Primary Metals; Industrial & Commercial Equipment & Computers; Food; 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 March continued positive (an index exceeding 50 percent) for the 14th consecutive month. NAPM's New Export Orders Index declined 0.3 percentage point to 55.3 percent for the month of March. Industries reporting growth in new export orders in March were: Petroleum; Printing & Publishing; Apparel; Wood & Wood Products; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Instruments & Photographic Equipment; Rubber & Plastic Products; Industrial & Commercial Equipment & Computers; Chemicals; Transportation & Equipment; and Electronic Components & Equipment.
Imports of materials by manufacturers grew in March at a faster rate, with an index of 54.9 percent. The Imports Index is 4.3 percentage points higher than February's report of 50.6 percent. The 11 industries reporting growth in import activity for March were: Leather; Furniture; Electronic Components & Equipment; Wood & Wood Products; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Rubber & Plastic Products; Instruments & Photographic Equipment; Chemicals; Fabricated Metals; Industrial & Commercial Equipment & Computers; and Transportation & Equipment.
Average commitment leadtime for Capital Expenditures declined 6 days to 108 days in March (note: this is the lowest number of days reported for Capital Expenditure Buying Policy since NAPM began collecting this data in January 1988). Average leadtime for Production Materials rose 5 days to 52 days. Average leadtime for Maintenance, Repair, and Operating (MRO) supplies is declined 5 days to 21 days (the lowest number of days reported since May 1998).
Capacitors; Electronics; Laptop Computers; Memory; and Styrene.
Adhesives; Aluminum — 11th month; Capacitors — 2nd month; Chemicals; Copper; Corrugated Containers — 13th month; Diesel — 3rd month; Electronics; Ethylene; Freight; Fuel Oil — 2nd month; Gasoline; Linerboard; Lubricants; Lumber; Natural Gas — 3rd month; Nickel — 2nd month; Paper — 10th month; Petroleum Products — 2nd month; Plastics — 5th month; Plastic Resins — 3rd month; Polyester; High Density Polyethylene; Polyethylene; Polypropylene; Resins — 7th month; Solvents — 3rd month; Stainless Steel — 8th month; Steel — 8th month; and Wood Pulp — 3rd 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 42.4 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 45,000 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 April 2000 data will be released at 10:00 a.m. (ET) on May 1, 2000.