FOR RELEASE: May 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 April 2001.
(Tempe, Arizona) — Economic activity in the manufacturing sector declined in April for the ninth consecutive month. The overall economy grew modestly in April 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 April. As the sector is struggling to gain a foothold that will reverse the decline, it is encouraging that pricing pressures appear to be moderating and inventory liquidation has accelerated. April appears to be a soft start for the second quarter when viewed across the indexes — particularly in Production as well as Employment, New Export Orders, and Imports."
NAPM's Backlog of Orders Index indicates that order backlogs declined for the 12th consecutive month. NAPM's Supplier Deliveries Index, after reversing direction in March, continues to reflect faster deliveries. Manufacturing employment declined in April as the index fell below the breakeven point (an index of 50 percent) for the seventh consecutive month. NAPM's Prices Index fell below 50 percent as manufacturers experienced lower prices for the second consecutive month after 22 months of paying higher prices. New Export Orders failed to grow in April as the index fell below 50 percent. April's Imports Index failed to grow for the fourth consecutive month. Comments from purchasing managers this month express concerns about the slowing economy, energy issues as we move into the summer season, and continuing slowness in the automotive sector.
NAPM's Purchasing Managers' Index is 43.2 percent in April, an increase of 0.1 percentage point from the 43.1 percent reported in March. NAPM's Production Index rose a meager 0.1 percentage point from 42.8 percent in March to 42.9 percent in April. NAPM's New Orders Index rose 3.6 percentage points from 42.3 percent in March to 45.9 percent in April. NAPM's Backlog of Orders Index is unchanged at 43.5 percent, indicating smaller backlogs. NAPM's Supplier Deliveries Index is 47.4 percent in April, indicating faster deliveries during the month. The NAPM Employment Index is at 38.1 percent for April, a decrease of 2.3 percentage points when compared to the 40.4 percent reported in March. NAPM's Prices Index in April is 48.9 percent, a decrease of one percentage point from April's 49.9 percent.
NAPM's Inventories Index is at 39.6 percent indicating a faster rate of inventory liquidation when compared to March's 44.2 percent. Responding to a special monthly question concerning customers' inventories of products purchased from the purchasers' organizations, 20 percent of the purchasing executives felt they were too high (up from 19 percent in March), while 20 percent felt they were too low (up from 15 percent in March) and 60 percent thought they were about right (down from 66 percent in March). NAPM's New Export Orders Index registered 47.3 percent, down from March's 50.6 percent. Imports of materials by manufacturers continued to decline as NAPM's Imports Index is 47.2 percent in April, down from March's 49.1 percent.
"The overall picture is one of continued decline in manufacturing activity during the month of April," added Ore. "The manufacturing sector is in its ninth month of decline and continues sluggish at best. Major concerns are energy costs and softening demand across many markets."
Of the 20 industries in the manufacturing sector, three reported growth: Food; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); and Chemicals.
"Capacitors — Tantalum and Caustic Soda are the commodities reported on the Short Supply List. Commodities with reports of price increases are: Aluminum (also reported down in price), Beef, Caustic Soda, Chemicals, Gasoline, Natural Gas (also reported down in price), and Resins. The commodities reported down in price are: Aluminum (also reported up in price), Copper, Corrugated Containers, Natural Gas (also reported up in price), Nickel, Paper and Stainless Steel," Ore stated.
Apr vs Mar
|Rate of Change|
Apr vs Mar
|Backlog of Orders||43.5||Contracting||Unchanged|
|New Export Orders||47.3||Contracting||From Growing|
The Purchasing Managers' Index (PMI) indicates that the manufacturing economy failed to grow during the month of April with an index of 43.2 percent, a slight increase when compared to March's PMI of 43.1 percent. This is the ninth 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 April PMI indicates a small amount of growth in the overall economy while the manufacturing sector continues to decline. Ore added, "The past relationship between the PMI and the overall economy indicates that the average PMI for the months of January through April (42.4 percent) corresponds to a -0.1 percent annual decrease in real gross domestic product (GDP). However, if the PMI for April (43.2 percent) turned out to be the annual average for 2001, this would correspond to a 0.2 percent increase in GDP."
NAPM's Production Index rose to 42.9 percent in April up slightly from 42.8 percent in March. This is the fifth consecutive month that the index has fallen below 50 percent. Of the 20 industries reporting, Food, Transportation & Equipment, and Industrial & Commercial Equipment & Computers reported growth in April. 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 April for the 10th consecutive month. The index is at 45.9 percent representing an increase of 3.6 percentage points when compared to March's 42.3 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 April, five industries reported higher rates of increase in new orders. They were (listed in order): Leather; Wood & Wood Products; Food; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); and Industrial & Commercial Equipment & Computers.
The Backlog of Orders Index failed to grow for the 12th consecutive month in April. NAPM's Backlog of Orders Index (not seasonally adjusted) registered 43.5 percent indicating the same rate of decline in manufacturers' backlogs as reported in March. Of the 90 percent of respondents who measure their backlog of orders, 16 percent reported greater backlogs, 29 percent reported smaller backlogs, and 55 percent reported no change from March. The were two industries reporting increases in backlog of orders during the month are Food and Industrial & Commercial Equipment & Computers.
NAPM's Supplier Deliveries Index in April indicates delivery performance is faster when compared to March (a reading below 50 percent indicates faster deliveries). At 47.4 percent, the index is 0.9 percentage point lower than March's 48.3 percent. The industries reporting slower supplier deliveries in April were: Textiles; Transportation & Equipment; and Chemicals.
NOTE: A list of commodities in short supply is available at the end of this report.
The rate of liquidation of manufacturers' inventories accelerated in April as the Inventories Index registered 39.6 percent, down from the 44.2 percent reported in March. The Inventories Index has been under 50 percent for 15 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 three industries report higher inventories in April over March: Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Glass, Stone & Aggregate; and Electronic Components & Equipment.
NAPM's Manufacturing Employment Index fell below 50 percent in April for the seventh consecutive month. The index registered 38.1 percent in April compared to 40.4 percent in March, a decrease of 2.3 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. Chemicals is the only industry indicating growth in employment during the month.
NAPM's Prices Index indicates manufacturers paid lower prices in April. With the index at 48.9 percent, this marks the second consecutive time the index has been below 50 percent after 22 consecutive months of higher prices. The index is 1 percentage point lower than March's 49.9 percent. In April, 18 percent of purchasing executives reported paying higher prices and 19 percent reported paying lower prices, while 63 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 five industries that reported paying higher prices were: Leather; Textiles; Petroleum; Food; and Glass, Stone & Aggregate.
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 registered 47.3 percent, 3.3 percentage points lower than March's index of 50.6 percent. The Index has fallen below 50 percent in six of the last seven months. Industries reporting growth in new export orders in April were: Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Wood & Wood Products; Paper; Chemicals; and Food.
Imports of materials by manufacturers continued to decline in April as the Imports Index registered 47.2 percent, a 1.9 percentage points decrease when compared to March's report of 49.1 percent. The three industries reporting growth in import activity for April were: Textiles; Food; and Electronic Components & Equipment.
Average commitment leadtime for Capital Expenditures declined 1 day to 107 days. Average leadtime for Production Materials rose 3 days to 45 days. Average leadtime for Maintenance, Repair, and Operating (MRO) supplies declined 2 days to 22 days.
Capacitors — Tantalum and Caustic Soda — 8th month.
Aluminum (also reported down in price); Beef; Caustic Soda — 10th month; Chemicals — 4th month; Gasoline — 4th month; Natural Gas — 16th month (also reported down in price); and Resins — 20th month.
Aluminum — 2nd month (also reported up in price); Copper; Corrugated Containers — 3rd month; Natural Gas — 3rd month (also reported up in price); Nickel — 2nd month; Paper; and Stainless Steel — 5th 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 May 2001 data will be released at 10:00 a.m. (ET) on June 1, 2001.