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November 1999 Manufacturing Report On Business®

FOR RELEASE: December 1, 1999

Contact: Zenobia Daruwalla
  NAPM Media Relations
  480/752-6276 ext. 3015
GROWTH IN MANUFACTURING CONTINUES IN NOVEMBER
SAY PURCHASING EXECUTIVES IN LATEST MANUFACTURING NAPM REPORT ON BUSINESS®

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 November 1999.

Purchasing Managers' Index (PMI) at 56.2%,
Growth in Production
New Orders, New Export Orders Improving
Prices Increasing

(Tempe, Arizona) — Economic activity in the manufacturing sector grew for the tenth consecutive month in November. The overall economy continued to grow in November for the 103rd 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 director of purchasing, Chesapeake Display and Packaging Company. "The manufacturing sector continued to grow in November though at a slightly slower rate than it grew in October. Both production and new orders grew during the month while NAPM’s Price Index continues to indicate higher prices manufacturers are paying for their purchases."

NAPM’s Backlog of Orders Index continues to grow, and NAPM’s Supplier Deliveries Index once again signals slowing deliveries. Manufacturing Employment grew during November as the index rose above the breakeven point (an index of 50) for the fourth consecutive month. NAPM’s Price Index continued to strengthen as 16 of 20 industries indicated paying higher prices on average during November. New Export Orders and Imports continue to grow with New Export Orders accelerating and Import Orders decelerating when compared to October. Concerns expressed this month included dumping in the steel industry and the implications of Y2K-based inventory demand. In general, purchasing managers are upbeat and optimistic about current business conditions.

NAPM’s Purchasing Managers' Index was slightly lower at 56.2 percent in November, down from 56.6 in October. NAPM's Production Index decreased 0.9 percentage point from 58.3 percent in October to 57.4 percent in November. NAPM's New Orders Index rose 0.4 percentage points from 59.5 percent in October to 59.9 percent in November. NAPM’s Backlog of Orders Index registered 58.5 percent, 4.5 percentage points higher than the 54.0 percent recorded in October. NAPM's Supplier Deliveries Index declined to 55.9 percent in November down from 56.6 percent in October. The NAPM Employment Index is at 52.2 for November, a decrease of 0.6 percentage point when compared to the 52.8 percent reported in October. NAPM's Price Index in November is 65.3 percent, a decrease of 4.1 percentage points from October.

NAPM's Inventories Index registered a breakeven 50 percent, indicating no change when compared to October. Responding to a special monthly question concerning customers' inventories of products purchased from the purchasers' organizations, 14 percent of the purchasing executives felt they were too high (up from 7 percent in October). On the other hand, 17 percent felt they were too low (down from 18 percent in October) and 69 percent thought they were about right (down from 75 percent in October).

NAPM's New Export Orders Index continued positive for the tenth consecutive month while increasing 2.1 percentage points to 54.5 percent. Imports of materials by manufacturers continued to grow in November, at a decelerating rate, as NAPM's Imports Index was down from 54.3 percent to 51.2 percent.

"The overall picture is one of continuing growth, though at a slightly decelerating rate, in manufacturing activity during the month of November," added Ore. "Production and New Orders continue to provide momentum and coupled with the continuing strength in New Export Orders, the manufacturing sector continues to prosper going into the last month of the year. Pricing power continues to exist in many basic commodities."

Of the 20 industries in the manufacturing sector, eight reported improved business in November. Industries that reported improvement over October were (listed in order): Printing & Publishing; Furniture; Industrial & Commercial Equipment and Computers; Textiles; Fabricated Metal Products; Paper; Tobacco; and Instruments & Photographic Equipment.

"There were no commodities reported on the Short Supply List. Commodities with reports of price increases were Aluminum; Caustic Soda; Copper; Corrugated Containers; Fuel Oil; Natural Gas; Nickel; Paper; Plastic; Plastic Resins; Polybags; Polyethylene; Polypropylene; Propylene; Resins; Solvents; Stainless Steel; Steel; Styrene; Wood Pulp; and Zinc. Sugar is the only commodity down in price," Ore stated.

NOVEMBER 1999 NAPM BUSINESS SURVEY AT A GLANCE
Series Nov.
Index
Direction
Nov. vs. Oct.
Rate of Change
Nov. vs. Oct.
PMI 56.2 Growing Slower
Production 57.4 Growing Slower
New Orders 59.9 Growing Faster
Backlog of Orders 58.5 Growing Faster
Supplier Deliveries 55.9 Slowing Slower
Inventories 50.0 Unchanged From Growing
Employment 52.2 Growing Slower
Prices 65.3 Increasing Slower
New Export Orders 54.5 Growing Faster
Imports 51.2 Growing Slower

THE ECONOMY AT A GLANCE
Overall Economy Growing Slower
Manufacturing Growing Slower

Purchasing Managers' Index (PMI)

The Purchasing Managers' Index (PMI) indicates that the manufacturing economy continued to grow during the month of November, but at a slightly slower rate, with an index of 56.2 percent. This is 0.4 percentage point lower when compared to October and the tenth 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 43.5 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 November (54.5 percent), corresponds to a 3.8 percent increase in gross domestic product (GDP). However, if the PMI for November (56.2 percent), turned out to be the annual average for 1999, this would correspond to a 4.4 percent increase in real GDP."

Month Nov’99 Oct’99 Sep’99 Aug’99 Jul’99
PMI% 56.2 56.6 57.8 54.2 53.4
Month Jun’99 May’99 Apr’99 Mar’99 Feb’99
PMI% 57.0 55.2 52.8 54.3 52.4
Month Jan’99 Dec’98 Nov’98 Oct’98 Sep’98
PMI% 49.5 45.3 47.0 48.4 49.1

Production

NAPM's Production Index grew in November for the eleventh consecutive month, registering 57.4 percent, a decrease of 0.9 percent point when compared to the October index of 58.3 percent.

An index above 49.8 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 November were (listed in order): Printing & Publishing; Fabricated Metals; Textiles; Tobacco; Glass, Stone & Aggregate; Industrial & Commercial Equipment & Computers; Food; Paper; Instruments & Photographic Equipment; Transportation & Equipment; and Electronic Components & Equipment.

Production %Better %Same %Worse Net Index
November 1999 31 54 15 +16 57.4
October 1999 28 63 9 +19 58.3
September 1999 34 56 10 +24 61.7
August 1999 27 58 15 +12 56.7

New Orders

NAPM's New Orders Index grew at an accelerating rate in November with an index of 59.9 percent, an increase of 0.4 percentage point when compared to October. A New Orders Index above 50.7 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 November, thirteen industries reported higher rates of increase in new orders. They were (listed in order): Furniture; Paper; Leather; Textiles; Industrial & Commercial Equipment & Computers; Printing & Publishing; Tobacco; Instruments & Photographic Equipment; Fabricated Metals; Primary Metals; Transportation & Equipment; Food; and Electronic Components & Equipment.

New
Orders
%Better %Same %Worse Net Index
November 1999 32 53 15 +17 59.9
October 1999 29 60 11 +18 59.5
September 1999 39 52 9 +30 64.4
August 1999 28 58 14 +14 56.6

Backlog of Orders

The Backlog of Orders Index grew at a faster rate in November when compared to October. This is the ninth consecutive month that NAPM’s Backlog of Orders Index (not seasonally adjusted) has been above 50 percent. The index recorded 58.5 percent, 4.5 percentage points higher than October. Fourteen industries reported an increase in backlog of orders during the month: Furniture; Apparel; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Paper; Leather; Textiles; Industrial & Commercial Equipment & Computers; Fabricated Metals; Electronic Components & Equipment; Instruments & Photographic Equipment; Chemicals; Transportation & Equipment; Food; and Printing & Publishing.

Backlog
of Orders
%
Reporting
%
Greater
%
Same
%
Less
Net Index
November 1999 88 31 55 14 +17 58.5
October 1999 88 22 64 14 +8 54.0
September 1999 90 27 55 18 +9 54.5
August 1999 90 22 61 17 +5 52.5

Supplier Deliveries

NAPM's Supplier Deliveries Index in November indicates delivery performance continued to slow with an index reading of 55.9 percent (a reading below 50 indicates faster delivery performance). The index is 0.7 percentage point lower than October. November marks the seventh consecutive month that the index has registered above 50. The industries reporting slower supplier deliveries in November were: Wood & Wood Products; Apparel; Printing & Publishing; Electronic Components & Equipment; Chemicals; Paper; Instruments & Photographic Equipment; Primary Metals; Rubber & Plastic Products; Industrial & Commercial Equipment & Computers; Fabricated Metals; Food; and Transportation & Equipment.

Supplier
Deliveries
%Slower %Same %Faster Net Index
November 1999 16 82 2 +14 55.9
October 1999 15 83 2 +13 56.6
September 1999 14 85 1 +13 55.9
August 1999 8 89 3 +5 51.1

NOTE: A list of commodities in short supply is available at the end of this report.

Inventories

Manufacturers' inventories are reported unchanged in November as the Inventories Index registered 50.0 percent, down from 51.1 percent in October. An Inventories Index over 41.5 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis' (BEA) figures on overall manufacturing inventories (constant 1987 dollars). The eight industries reporting higher inventories in November over October were: Apparel; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Furniture; Tobacco; Instruments & Photographic Equipment; Printing & Publishing; Industrial & Commercial Equipment & Computers; and Electronic Components & Equipment.

Inventories %Higher %Same %Lower Net Index
November 1999 16 63 21 -5 50.0
October 1999 15 67 18 -3 51.1
September 1999 10 69 21 -11 43.2
August 1999 14 67 19 -5 46.6

Employment

NAPM’s Manufacturing Employment Index continued above 50 in November for the fourth consecutive month. The index registered 52.2 percent in November compared to 52.8 percent in October, a decrease of 0.6 percent point. An Employment Index above 47.0 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment. Eight industries indicated growth in employment and they were: Furniture; Printing & Publishing; Food; Transportation & Equipment; Primary Metals; Industrial & Commercial Equipment & Computers; Fabricated Metals; and Chemicals.

Employment %Higher %Same %Lower Net Index
November 1999 20 65 15 +5 52.2
October 1999 15 74 11 +4 52.8
September 1999 16 69 15 +1 51.5
August 1999 17 71 12 +5 53.4

Prices

NAPM’s Price Index is 65.3 percent in November. Manufacturers continue to pay higher prices, but the Price Index has decelerated from October as the Index declined from 69.4 percent, a decrease of 4.1 percentage points. The Index has now been above the 50 mark for seven consecutive months. In November, 35 percent of purchasing executives reported paying higher prices, 4 percent reported paying lower prices, while 61 percent reported that prices were unchanged from the preceding month.

A Price Index below 46.7 percent, over time, is generally consistent with a decrease in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices. The sixteen industries paying higher prices were: Wood & Wood Products; Textiles; Printing & Publishing; Apparel; Chemicals; Instruments & Photographic Equipment; Leather; Paper; Fabricated Metals; Petroleum; Tobacco; Electronic Components & Equipment; Primary Metals; Transportation & Equipment; Industrial & Commercial Equipment & Computers; and Food.

Prices %Higher %Same %Lower Net Index
November 1999 35 61 4 +31 65.3
October 1999 45 51 4 +41 69.4
September 1999 42 52 6 +36 67.6
August 1999 32 62 6 +26 59.8

NOTE: A list of commodities up in price and down in price is available at the end of this report.

New Export Orders

NAPM's New Export Orders Index for November continued positive (an index exceeding 50 percent) for the tenth consecutive month. NAPM’s New Export Orders Index rose 2.1 percentage points to 54.5 for the month of November. Industries reporting growth in new export orders in November were: Furniture; Tobacco; Instruments & Photographic Equipment; Textiles; Paper; Industrial & Commercial Equipment & Computers; Transportation & Equipment; Food; Chemicals; and Electronic Components & Equipment.

New Export
Orders
%Exporting %Better %Same %Worse Net Index
November 1999 76 20 72 8 +12 54.5
October 1999 77 11 82 7 +4 52.4
September 1999 77 20 76 4 +16 56.6
August 1999 77 16 78 6 +10 54.2

Imports

Imports of materials by manufacturers continued to grow in November at a decelerating rate with an index of 51.2 percent. The Imports Index is 3.1 percentage points lower than October’s report of 54.3 percent. The six industries reporting growth in import activity for November were: Furniture; Leather; Industrial & Commercial Equipment & Computers; Paper; Fabricated Metals; and Electronic Components & Equipment.

Imports %Importing %Higher %Same %Lower Net Index
November 1999 74 14 74 12 +2 51.2
October 1999 74 13 83 4 +9 54.3
September 1999 77 17 77 6 +11 55.7
August 1999 76 14 81 5 +9 53.9

Buying Policy

Average commitment leadtime for Capital Expenditures rose by 2 days to 116 days in November. Average leadtime for Production Materials rose 5 days to 48 days. Average leadtime for Maintenance, Repair, and Operating (MRO) supplies rose to 26 days, up 1 day from October.

Percent Reporting
  Hand
to
Mouth
30
Days
60
Days
90
Days
6
Mos.
1
Year+
Avg.
Days
Capital Expenditures              
November 1999 18 8 15 23 26 10 116
October 1999 19 9 13 22 28 9 114
September 1999 19 10 14 21 27 9 112
August 1999 18 8 14 20 31 9 118
Production Materials              
November 1999 26 39 19 10 4 2 48
October 1999 28 38 21 9 3 1 43
September 1999 23 45 16 12 3 1 44
August 1999 27 36 21 11 2 3 49
MRO Supplies              
November 1999 49 38 9 2 1 1 26
October 1999 49 38 10 2 0 1 25
September 1999 47 40 9 4 0 0 23
August 1999 45 40 10 3 1 1 28

In Short Supply

No commodities in short supply.

Up in Price

Aluminum — 7th month; Caustic Soda — 3rd month; Copper — 5th month; Corrugated Containers — 9th month; Fuel Oil — 2nd month; Natural Gas — 8th month; Nickel; Paper — 6th month; Plastic; Plastic Resins; Polybags; Polyethylene — 8th month; Polypropylene — 7th month; Propylene — 2nd month; Resins — 3rd month; Solvents — 2nd month; Stainless Steel — 4th month; Steel — 4th month; Styrene — 2nd month; Wood Pulp — 4th month; and Zinc.

Down in Price

Sugar.

Data and Method of Presentation

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 43.5 percent, over a period of time, indicates that the overall economy, or Gross Domestic Product (GDP), is generally expanding, below 43.5 percent, that it is generally declining. The distance from 50 percent or 43.5 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 December 1999 data will be released at 10:00 a.m. (ET) on January 3, 2000.

 

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