FOR RELEASE: April 2, 2001
|ISM, Media Relations|
|(800) 888-6276, 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 2001.
(Tempe, Arizona) — Economic activity in the manufacturing sector declined in March for the eighth consecutive month. The overall economy grew modestly in March 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 March. However, it is encouraging that prices are moderating and there is growth in new export orders. Other bright spots were Production 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 11th consecutive month. NAPM's Supplier Deliveries Index reversed direction and reflects that deliveries are faster than they were in February. Manufacturing employment declined in March as the index fell below the breakeven point (an index of 50 percent) for the sixth consecutive month. NAPM's Prices Index fell below 50 percent as manufacturers experienced lower prices after 22 months of gains. New Export Orders grew in March as the index rose above 50 percent after five months of decline. March's Imports Index failed to grow for the third consecutive month. Comments from purchasing managers this month express concern about a worsening U.S. energy situation, particularly in the West, and the impact of energy uncertainty on operations.
NAPM's Purchasing Managers' Index is 43.1 percent in March, an increase of 1.2 percentage points from the 41.9 percent reported in February. NAPM's Production Index rose 3.1 percentage points from 39.7 percent in February to 42.8 in March. NAPM's New Orders Index rose 1.5 percentage points from 40.8 percent in February to 42.3 percent in March. NAPM's Backlog of Orders Index registered 43.5 percent, indicating smaller backlogs. NAPM's Supplier Deliveries Index is 48.3 percent in March, indicating slower deliveries during the month. The NAPM Employment Index is at 40.4 percent for March, an increase of 3.2 percentage points when compared to the 37.2 percent reported in February. NAPM's Prices Index in March is 49.9 percent, a decrease of 8.2 percentage points from February's 58.1 percent.
NAPM's Inventories Index is at 44.2 percent indicating a faster rate of inventory liquidation when compared to February's 45.7 percent. Responding to a special monthly question concerning customers' inventories of products purchased from the purchasers' organizations, 19 percent of the purchasing executives felt they were too high (down from 22 percent in February), while 15 percent felt they were too low (down from 17 percent in February) and 66 percent thought they were about right (up from 61 percent in February). NAPM's New Export Orders Index registered 50.6 percent, up from February's 47.6 percent. Imports of materials by manufacturers continued to decline, but at a decelerating rate, as NAPM's Imports Index is 49.1 percent in March, up from February's 46.5 percent.
"The overall picture is one of continued decline in manufacturing activity during the month of March," added Ore. "The manufacturing sector is in its eighth month of decline and appears to lack drivers sufficient to stimulate recovery. Petroleum-based products have apparently stabilized enough to relieve major upward pressure on prices; however, manufacturers are still concerned about energy costs for natural gas and electricity. Reductions in manufacturing employment continue but at a slower rate."
Of the 20 industries in the manufacturing sector, three reported growth: Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Instruments & Photographic Equipment; and Chemicals.
"Caustic Soda, Coal, Electronic Components, Natural Gas, and Vanilla are the commodities reported on the Short Supply List. Commodities with reports of price increases are: Caustic Soda, Chemicals, Energy, Films, Gasoline, Natural Gas (also reported down in price), Plastic, Plastic Resins, High Density Polyethylene, Resins, and Steel (also reported down in price). Aluminum, Corrugated Containers, Natural Gas (also reported up in price), Nickel, Propylene, Stainless Steel, and Steel (also reported up in price) are the commodities reported down in price," Ore stated.
Mar vs Feb
|Rate of Change|
Mar vs Feb
|Backlog of Orders||43.5||Contracting||Slower|
|Supplier Deliveries||48.3||Faster||From Slower|
|New Export Orders||50.6||Growing||From Contracting|
|Overall Economy||Growing||From Contracting|
The Purchasing Managers' Index (PMI) indicates that the manufacturing economy failed to grow during the month of March with an index of 43.1 percent. This is the eighth 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 contracting.
A PMI in excess of 42.7 percent, over a period of time, generally indicates an expansion of the overall economy. The March PMI marks a return to growth in 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 (42.1 percent) corresponds to a -0.2 percent annual decrease in real gross domestic product (GDP). However, if the PMI for March (43.1 percent) turned out to be the annual average for 2001, this would correspond to a 0.1 percent increase in GDP."
|Month||Mar '01||Feb '01||Jan '01||Dec '00||Nov '00|
|Month||Oct '00||Sep '00||Aug '00||Jul '00||Jun '00|
|Month||May '00||Apr '00||Mar '00||Feb '00||Jan '00|
NAPM's Production Index rose to 42.8 percent in March up from 39.7 percent in February. This is the fourth consecutive month that the index has fallen below 50 percent. Of the 20 industries reporting, Instruments & Photographic Equipment; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); and Chemicals reported growth in March. 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 March for the ninth consecutive month. The index is at 42.3 percent representing an increase of 1.5 percentage points when compared to February's 40.8 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 March, five industries reported higher rates of increase in new orders. They were (listed in order): Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Instruments & Photographic Equipment; Industrial & Commercial Equipment & Computers; Chemicals; and Food.
The Backlog of Orders Index failed to grow for the 11th consecutive month in March. NAPM's Backlog of Orders Index (not seasonally adjusted) registered 43.5 percent evidencing a slower rate of decline in manufacturers' backlogs. Of the 88 percent of respondents who measure their backlog of orders, 20 percent reported greater backlogs, 33 percent reported smaller backlogs, and 47 percent reported no change from February. There were five industries reporting increases in backlog of orders during the month: Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Wood & Wood Products; Instruments & Photographic Equipment; Chemicals; and Industrial & Commercial Equipment & Computers.
NAPM's Supplier Deliveries Index in March indicates delivery performance is faster when compared to February (a reading below 50 percent indicates faster deliveries). At 48.3 percent, the index is three percentage points lower than February's 51.3 percent. The industries reporting faster supplier deliveries in March were: Textiles; Instruments & Photographic Equipment; 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 44.2 percent, down from the 45.7 percent reported in February. The Inventories Index has been under 50 percent for 14 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). Only two industries report higher inventories in March over February: Glass, Stone & Aggregate; and Furniture.
NAPM's Manufacturing Employment Index fell below 50 percent in March for the sixth consecutive month. The index registered 40.4 percent in March compared to 37.2 percent in February, an increase of 3.2 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) was the only industry indicating growth in employment during the month.
NAPM's Prices Index indicates manufacturers paid lower prices in March. With the index at 49.9 percent, this marks the first time the index has been below 50 percent after 22 consecutive months of higher prices. The index is 8.2 percentage points lower than February's 58.1 percent. In March, 21 percent of purchasing executives reported paying higher prices and 23 percent reported paying lower prices, while 56 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 nine industries that reported paying higher prices were: Leather; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Glass, Stone & Aggregate; Food; Textiles; Wood & Wood Products; Printing & Publishing; Chemicals; and Electronic Components & Equipment.
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 registered 50.6 percent, three percentage points higher than February's index of 47.6 percent. This is the first time the index has exceeded 50 percent after five consecutive months of contraction. Industries reporting growth in new export orders in March were: Glass, Stone & Aggregate; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Instruments & Photographic Equipment; Food; Rubber & Plastic Products; and Industrial & Commercial Equipment & Computers.
Imports of materials by manufacturers continued to decline, but at a decelerating rate, in March as the Imports Index registered 49.1 percent, a 2.6 percentage points increase when compared to February's report of 46.5 percent. The three industries reporting growth in import activity for March were: Textiles; Fabricated Metals; and Transportation & Equipment.
Average commitment leadtime for Capital Expenditures declined 2 days to 108 days. Average leadtime for Production Materials declined 1 day to 42 days. Average leadtime for Maintenance, Repair, and Operating (MRO) supplies rose 1 day to 24 days.
Caustic Soda — 7th month; Coal — 2nd month; Electronic Components — 7th month; Natural Gas — 3rd month; and Vanilla.
Caustic Soda — 9th month; Chemicals — 3rd month; Energy — 2nd month; Films; Gasoline — 3rd month; Natural Gas — 15th month (also shown down in price); Plastic — 2nd month; Plastic Resins; High Density Polyethylene; Resins — 19th month; and Steel.
Aluminum; Corrugated Containers — 2nd month; Natural Gas — 2nd month (also shown up in price); Nickel; Propylene; Stainless Steel — 4th month; and Steel — 10th 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 180 affiliates with more than 47,000 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 April 2001 data will be released at 10:00 a.m. (ET) on May 1, 2001.