FOR RELEASE: July 3, 2000
|NAPM, Media Relations|
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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 June 2000.
(Tempe, Arizona) — Economic activity in the manufacturing sector grew for the 17th consecutive month in June. The overall economy continued to grow in June for the 110th 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 continued to grow in June, but at a decelerating rate. This continues a trend in the sector that began in November 1999. 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, however, there are continuing signs that pricing activity topped out in the second quarter as the rate of price increase activity slowed in June as it did in the prior two months. Manufacturing employment continues to grow, but the rate of growth is quite small when compared to May."
NAPM's Backlog of Orders Index indicates that order backlogs declined for the second consecutive month. NAPM's Supplier Deliveries Index again signals slowing deliveries, but at a slightly slower rate. Manufacturing Employment growth slowed during June as the index rose above the breakeven point (an index of 50) for the 14th consecutive month. NAPM's Price Index lost some momentum, and it is now obvious that the prices manufacturers pay peaked in March. The rate of growth in New Export Orders slowed in June, though overall exports appear to have sufficient momentum and the prospect of continued growth. Imports continued to grow in June with a rate of growth slightly greater than May. Comments from purchasing managers this month generally expressed concerns about interest rates, fuel prices, a construction slowdown, SUV sales, and the tight labor market. Members report strong business in the high tech sector while the commodity-based industries are seeing a slowing, particularly linerboard and steel.
NAPM's Purchasing Managers' Index was 51.8 percent in June, down from 53.2 percent in May. NAPM's Production Index decreased 2.7 percentage points from 56.3 percent in May to 53.6 percent in June. NAPM's New Orders Index declined 0.5 percentage point from 51.1 percent in May to 50.6 percent in June. NAPM's Backlog of Orders Index registered 48.5 percent, indicating small backlogs for the second consecutive month. NAPM's Supplier Deliveries Index is 55.1 percent in June, indicating slower deliveries during the month. The NAPM Employment Index is at 50.8 percent for June, a decrease of 3.3 percentage points when compared to the 54.1 percent reported in May. NAPM's Price Index in June is 61.2 percent, a decline of 4.6 percentage points from May's 65.8 percent.
NAPM's Inventories Index is at 47.4 percent indicating a slower rate of inventory liquidation when compared to May's 47.1 percent. 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 (down from 12 percent in May), while 16 percent felt they were too low (up from 11 percent in May) and 74 percent thought they were about right (down from 77 percent in May).
NAPM's New Export Orders Index continued positive for the 17th consecutive month though it declined to 53.2 percent from 56.3 percent in May. Imports of materials by manufacturers strengthened as NAPM's Imports Index is 56 percent in June, up from May's 54.7 percent.
"The overall picture is one of slower growth in manufacturing activity during the month of June," added Ore. "The rate of growth has moderated significantly, supported by the PMI trend for the last eight months, and the number of industries reporting growth declined from 14 to 11 when comparing June to May. Though there is still significant pricing power in many of the basic commodities, the decline in the rate of acceleration of the Prices Index during April, May, and June continues to be viewed as positive and appears to be reducing the upward pressure on prices."
Of the 20 industries in the manufacturing sector, 11 reported improved business in June. Industries that reported improvement over May were (listed in order): Furniture; Electronic Components & Equipment; Tobacco; Instruments & Photographic Equipment; Petroleum; Rubber & Plastic Products; Food; Wood & Wood Products; Chemicals; Industrial & Commercial Equipment & Computers; and Fabricated Metals.
"Electronics and Wood Pulp are the commodities reported on the Short Supply List. Commodities with reports of price increases: Corrugated Containers; Fuel Oil; Gasoline; Linerboard; Methanol; Natural Gas; Palladium; Paper; Petroleum Products; Plastics; Plastic Resins; Polyethylene Film; Polypropylene; Polystyrene; Resins; Stainless Steel; and Steel (also reported down in price). Caustic Soda; Steel (also reported up in price); and Sugar are the commodities reported down in price," Ore stated.
Jun vs May
|Rate of Change|
Jun vs May
|Backlog of Orders||48.5||Contracting||Faster|
|New Export Orders||53.2||Growing||Slower|
The Purchasing Managers' Index (PMI) indicates that the manufacturing economy continued to grow during the month of June with an index of 51.8 percent. However, this is the slowest rate of growth evidenced by the Index since January 1999. When compared to May's 53.2 percent, this represents a decrease of 1.4 percentage points. June is the 17th 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 June (54.8 percent) corresponds to a 4.4 percent annual increase in real gross domestic product (GDP). However, if the PMI for June (51.8 percent) turned out to be the annual average for 2000, this would correspond to a 3.4 percent increase in GDP."
NAPM's Production Index grew in June, but at a decelerating rate. This is the 18th consecutive month of growth. The index is 53.6 percent, a decrease of 2.7 percentage points when compared to the May index of 56.3 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 June were (listed in order): Tobacco; Electronic Components & Equipment; Petroleum; Rubber & Plastic Products; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Instruments & Photographic Equipment; Wood & Wood Products; Food; Chemicals; Furniture; and Fabricated Metals.
NAPM's New Orders Index grew, but at a slower rate in June with an index of 50.6 percent, a decrease of 0.5 percentage point when compared to 51.1 percent in May. 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 June, 10 industries reported higher rates of increase in new orders. They were (listed in order): Furniture; Tobacco; Electronic Components & Equipment; Wood & Wood Products; Petroleum; Instruments & Photographic Equipment; Food; Printing & Publishing; Chemicals; and Industrial & Commercial Equipment & Computers.
The Backlog of Orders Index failed to grow in for the second consecutive month in June. NAPM's Backlog of Orders Index (not seasonally adjusted) registered 48.5 percent. Of the 90 percent of respondents who measure their backlog of orders, 23 percent reported greater backlogs, 26 percent reported smaller backlogs, and 51 percent reported no change from May. Seven industries reported an increase in backlog of orders during the month: Leather; Furniture; Electronic Components & Equipment; Textiles; Rubber & Plastic Products; Chemicals; and Industrial & Commercial Equipment & Computers.
NAPM's Supplier Deliveries Index in June indicates delivery performance continued to slow, but at a slightly accelerating rate, with an index reading of 55.1 percent (a reading below 50 indicates faster delivery performance). The index is 0.1 percentage point higher than May's 55 percent. June marks the 14th consecutive month that the index has registered above 50. The industries reporting slower supplier deliveries in June were: Instruments & Photographic Equipment; Electronic Components & Equipment; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Textiles; Transportation & Equipment; Rubber & Plastic Products; Fabricated Metals; Industrial & Commercial Equipment & Computers; 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, however, the rate of change is slower as the Inventories Index registered 47.4 percent, up from 47.1 percent in May. 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 six industries reporting higher inventories in June over May were: Glass, Stone & Aggregate; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Furniture; Primary Metals; Paper; and Food.
NAPM's Manufacturing Employment Index continued above 50 in June for the 14th consecutive month. However, the rate of growth is decelerating as the index registered 50.8 percent in June compared to 54.1 percent in May, a decrease of 3.3 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: Electronic Components & Equipment; Furniture; Tobacco; Petroleum; Rubber & Plastic Products; Industrial & Commercial Equipment & Computers; Instruments & Photographic Equipment; Fabricated Metals; Food; and Transportation & Equipment.
NAPM's Price Index indicates manufacturers continued to pay higher prices in June. With the index at 61.2 percent, there is continuing deceleration in the rate from May as the index is 4.6 percentage points lower than May's mark of 65.8 percent. This index has been above 50 percent for 14 consecutive months, with the last 10 months above 60 percent. In June, 34 percent of purchasing executives reported paying higher prices and 6 percent reported paying lower prices, while 60 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 19 industries paying higher prices were: Leather; Glass, Stone & Aggregate; Petroleum; Apparel; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Textiles; Food; Paper; Furniture; Chemicals; Electronic Components & Equipment; Primary Metals; Instruments & Photographic Equipment; Printing & Publishing; Fabricated Metals; Industrial & Commercial Equipment & Computers; Rubber & Plastic Products; Wood & Wood Products; and Transportation & 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 June continued positive (an index exceeding 50 percent) for the 17th consecutive month. NAPM's New Export Orders Index declined 3.1 percentage points to 53.2 percent from 56.3 percent in May. Industries reporting growth in new export orders in June were: Petroleum; Electronic Components & Equipment; Rubber & Plastic Products; Chemicals; Instruments & Photographic Equipment; Transportation & Equipment; and Food.
Imports of materials by manufacturers grew in June at a faster rate, with an index of 56 percent. The Imports Index is 1.3 percentage points higher than May's report of 54.7 percent.
The eight industries reporting growth in import activity for June were: Furniture; Paper; Fabricated Metals; Chemicals; Rubber & Plastic Products; Electronic Components & Equipment; Wood & Wood Products; and Food.
Average commitment leadtime for Capital Expenditures rose 7 days to 120 days. Average leadtime for Production Materials increased 3 days to 47 days. Average leadtime for Maintenance, Repair, and Operating (MRO) supplies increased 1 day to 25 days.
Electronics — 4th month and Wood Pulp — 3rd month.
Corrugated Containers — 16th month; Fuel Oil; Gasoline; Linerboard — 4th month; Methanol; Natural Gas — 6th month; Palladium; Paper — 13th month; Petroleum Products — 5th month; Plastics — 8th month; Plastic Resins — 2nd month; Polyethylene Film — 2nd month; Polypropylene — 4th month; Polystyrene; Resins — 10th month; Stainless Steel — 11th month; and Steel — 11th month (also shown down in price).
Caustic Soda — 3rd month; Steel (also shown up in price); and Sugar.
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 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 July 2000 data will be released at 10:00 a.m. (ET) on August 1, 2000.