FOR RELEASE: May 1, 2000
|Contact:||Julia K. Ogden|
|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 April 2000.
(Tempe, Arizona) — Economic activity in the manufacturing sector grew for the 15th consecutive month in April. The overall economy continued to grow in April for the 108th 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 decelerating when the April PMI is compared with March. Both Production and New Orders continue to grow though at slower rates. The NAPM Prices Index continues to indicate manufacturers are paying higher prices for their purchases, but there are signs of moderation as the rate of price increase activity appears to be slowing. Manufacturing employment continues to grow and the rate of growth is faster than March."
NAPM's Backlog of Orders Index is the same as March's, indicating that the rate of growth in order backlogs is unchanged. NAPM's Supplier Deliveries Index again signals slowing deliveries and at a faster rate. Manufacturing Employment grew during April as the index rose above the breakeven point (an index of 50) for the 12th consecutive month. NAPM's Price Index continues strong, but offers the possibility that prices may have peaked in March based on its decelerating rate of growth, as 17 of 20 industries indicated paying higher prices on average during April. The rate of growth in New Export Orders slowed in April after a fairly robust first quarter. Imports gained momentum in April, posting the highest level since September 1999. Comments from purchasing managers this month generally expressed concerns about inflation, rising prices, energy costs, strong dollar, strengthening Asian markets, higher inventories, and tight labor. Though the concerns are numerous, they reflect a tendency toward cautious optimism as purchasing managers also feel that the economy is presently quite robust and the near term prospects are very good.
NAPM's Purchasing Managers' Index was slightly lower at 54.9 percent in April, down from 55.8 percent in March. NAPM's Production Index decreased 3.6 percentage points from 61.8 percent in March to 58.2 percent in April. NAPM's New Orders Index declined 0.6 percentage point from 56.9 percent in March to 56.3 percent in April. NAPM's Backlog of Orders Index registered 51 percent, the same as recorded in March. NAPM's Supplier Deliveries Index is 55.6 percent in April, indicating slower deliveries when compared to March's 54.1 percent. The NAPM Employment Index is at 53.2 percent for April, an increase of 1.7 percentage points when compared to the 51.5 percent reported in March. NAPM's Price Index in April is 76 percent, a decline of 3.8 percentage points from March's 79.8 percent.
NAPM's Inventories Index declined to 45.2 percent indicating a faster rate of inventory liquidation when compared to March (48.4 percent). 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 March), while 15 percent felt they were too low (up from 14 percent in March) and 76 percent thought they were about right (same as March).
NAPM's New Export Orders Index continued positive for the 15th consecutive month though weakening to 50.7 percent from 55.3 percent in March. Imports of materials by manufacturers continued to grow and at a slightly faster rate as NAPM's Imports Index is 55.1 percent in April, up from March's 54.9 percent.
"The overall picture is one of continuing growth in manufacturing activity during the month of April," added Ore. "While growth is still quite strong, the PMI trend for the last six months indicates deceleration in the rate of growth. Though there is still significant pricing power in many of the basic commodities, the decline in the rate of acceleration of the Prices Index can be viewed as positive. It also appears that the recent decline in energy prices has not found its way through the manufacturing sector this month. This should give hope to further declines in the Prices Index in the near term."
Of the 20 industries in the manufacturing sector, 16 reported improved business in April. Industries that reported improvement over March were (listed in order): Furniture; Electronic Components & Equipment; Chemicals; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Wood & Wood Products; Instruments & Photographic Equipment; Petroleum; Industrial & Commercial Equipment & Computers; Printing & Publishing; Fabricated Metals; Textiles; Rubber & Plastic Products; Apparel; Primary Metals; Transportation & Equipment; and Paper.
"Capacitors; Electronics; and Wood Pulp are the commodities reported on the Short Supply List. Commodities with reports of price increases: Aluminum; Corrugated Containers; Linerboard; Natural Gas; Nickel; Oil; Packaging; Paper; Paper Products; Petroleum Products; Plastic; Plastic Products; Polyethylene, Polypropylene; Polystyrene; Resins; Solvents; Stainless Steel; Steel; Styrene; Transportation; and Wood Pulp. Commodities reported down in price are Aluminum, Caustic Soda and Copper," Ore stated.
Apr vs Mar
|Rate of Change|
Apr vs Mar
|Backlog of Orders||51.0||Growing||Same|
|New Export Orders||50.7||Growing||Slower|
The Purchasing Managers' Index (PMI) indicates that the manufacturing economy continued to grow during the month of April with an index of 54.9 percent. This is 0.9 percentage point lower when compared to March and the 15th 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 April (56 percent) corresponds to a 4.8 percent annual increase in real gross domestic product (GDP). However, if the PMI for April (54.9 percent) turned out to be the annual average for 2000, this would correspond to a 4.5 percent increase in GDP."
NAPM's Production Index grew in April, but at a decelerating rate. This is the 16th consecutive month of growth. The index is 58.2 percent, a decrease of 3.6 percentage points when compared to the March index of 61.8 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 April were (listed in order): Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Furniture; Electronic Component & Equipment; Apparel; Chemicals; Wood & Wood Products; Instruments & Photographic Equipment; Printing & Publishing; Petroleum; Fabricated Metals; Textiles; Rubber & Plastic Products; Industrial & Commercial Equipment & Computers; Transportation & Equipment; Primary Metals; and Food.
NAPM's New Orders Index grew at a slower rate in April with an index of 56.3 percent, a decrease of 0.6 percentage point when compared to 56.9 percent in March. 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 April, 14 industries reported higher rates of increase in new orders. They were (listed in order): Furniture; Chemicals; Electronic Components & Equipment; Leather; Wood & Wood Products; Industrial & Commercial Equipment & Computers; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Petroleum; Apparel; Rubber & Plastic Products; Instruments & Photographic Equipment; Printing & Publishing; Transportation & Equipment; and Primary Metals.
The Backlog of Orders Index grew at the same rate as in March. NAPM's Backlog of Orders Index (not seasonally adjusted) registered 51 percent. Of the 89 percent of respondents, who measure their backlog of orders, 23 percent reported greater backlogs, 21 percent reported smaller backlogs, and 56 percent reported no change from March. Nine industries reported an increase in backlog of orders during the month: Furniture; Leather; Apparel; Rubber & Plastic Products; Chemicals; Industrial & Commercial Equipment & Computers; Wood & Wood Products; Primary Metals; and Electronic Components & Equipment.
NAPM's Supplier Deliveries Index in April indicates delivery performance continued to slow at an accelerating rate, with an index reading of 55.6 percent (a reading below 50 indicates faster delivery performance). The index is 1.5 percentage points higher than March's 54.1 percent. April marks the 12th consecutive month that the index has registered above 50. The industries reporting slower supplier deliveries in April were: Industrial & Commercial Equipment & Computers; Instruments & Photographic Equipment; Furniture; Petroleum; Primary Metals; Fabricated Metals; Electronic Components & Equipment; Paper; Transportation & Equipment; Printing & Publishing; Chemicals; and Food.
NOTE: A list of commodities in short supply is available at the end of this report.
Manufacturers inventories are still being liquidated. The rate of change is faster as the Inventories Index registered 45.2 percent, down from 48.4 percent in March.
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 April over March were: Fabricated Metals; Instruments & Photographic Equipment; Wood & Wood Products; and Primary Metals.
NAPM's Manufacturing Employment Index continued above 50 in April for the 12th consecutive month. The index registered 53.2 percent in April compared to 51.5 percent in March, an increase 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. Ten industries indicated growth in employment: Furniture; Textiles; Electronic Components & Equipment; Wood & Wood Products; Printing & Publishing; Rubber & Plastic Products; Fabricated Metals; Instruments & Photographic Equipment; Chemicals; and Industrial & Commercial Equipment & Computers.
NAPM's Price Index is 76 percent in April, 3.8 percentage points lower than the 79.8 percent recorded for March. Manufacturers continue to pay higher prices as the Index has been above 50 percent for 12 consecutive months, with the last eight months above 60 percent. In April, 51 percent of purchasing executives reported paying higher prices and 5 percent reported paying lower prices, while 44 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: Textiles; Apparel; Paper; Rubber & Miscellaneous Products; Wood & Wood Products; Chemicals; Printing & Publishing; Food; Petroleum; Leather; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Electronic Components & Equipment; Fabricated Metals; Transportation & Equipment; Industrial & Commercial Equipment & Computers; Instruments & Photographic Equipment; 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 April continued positive (an index exceeding 50 percent) for the 15th consecutive month. NAPM's New Export Orders Index declined 4.6 percentage points to 50.7 percent from 55.3 percent in March. Industries reporting growth in new export orders in April were: Petroleum; Apparel; Furniture; Electronic Components & Equipment; Industrial & Commercial Equipment & Computers; and Primary Metals.
Imports of materials by manufacturers grew in April at a slightly faster rate, with an index of 55.1 percent. The Imports Index is 0.2 percentage point higher than March's report of 54.9 percent. The nine industries reporting growth in import activity for April were: Leather; Textiles; Electronic Components & Equipment; Furniture; Wood & Wood Products; Rubber & Plastic Products; Chemicals; Fabricated Metals; and Transportation & Equipment.
Average commitment leadtime for Capital Expenditures declined 7 days to 101 days in April (note: this is the lowest number of days reported for Capital Expenditure Buying Policy since NAPM began collecting this data in February 1988). Average leadtime for Production Materials declined 6 days to 46 days. Average leadtime for Maintenance, Repair, and Operating (MRO) supplies rose 5 days to 26 days.
Capacitors — 2nd month; Electronics — 2nd month; and Wood Pulp.
Aluminum — 12th month (also reported down in price); Corrugated Containers — 14th month; Linerboard — 2nd month; Natural Gas — 4th month; Nickel — 3rd month; Oil — 3rd month; Packaging; Paper — 11th month; Paper Products; Petroleum Products — 3rd month; Plastics — 6th month; Plastic Products; Polyethylene — 2nd month; Polypropylene — 2nd month; Polystyrene; Resins — 8th month; Solvents — 4th month; Stainless Steel — 9th month; Steel — 9th month; Transportation; and Wood Pulp — 4th month.
Aluminum (also reported up in price); Caustic Soda; and Copper.
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 May 2000 data will be released at 10:00 a.m. (ET) on June 1, 2000.