April 1999 Manufacturing NAPM Report On Business®
FOR RELEASE: May 3, 1999
|NAPM Media Relations|
|602/752-6276 ext. 3015|
Growth in Manufacturing Continues in April 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 April 1999.
Purchasing Managers' Index (PMI) at 52.8%
Growth in Production, New Orders, New Export Orders
(Tempe, Arizona) Economic activity in the manufacturing sector grew for the third consecutive month in April providing continuing signs of recovery. The overall economy continued to grow in April for the 96th 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, corporate purchasing, Chesapeake Corporation. "The manufacturing sector continued to improve in April. Both production and new orders remained positive and it appears that the manufacturing sector has significant momentum, with a much broader base of growth this month as 16 of 20 manufacturing industries were above the breakeven line (an index greater than 50). Capital expenditures showed some improvement over March, but still remain weak by historical measures. NAPM's Backlog of Orders Index has strengthened significantly in the last three months and should help drive activity in May and June. The NAPM Price Index indicates the decline in prices paid by manufacturers all but subsided in April as the index reached its highest level since turning downward in January 1998."
NAPM's Backlog of Orders Index gained additional momentum indicating growing manufacturing order backlog, while NAPM's Supplier Deliveries Index sends a somewhat contrary signal that indicates deliveries are slightly faster. Manufacturing Employment failed to grow again in April for the eleventh consecutive month. NAPM's Price Index continues to decline, but at a significantly slower rate. Export Orders are once again growing and have reversed the downward trend that first surfaced in December 1997. Imports also grew during April. Our panel of purchasing managers say that business conditions are improving and many note a very positive environment for the second and third quarters. The major concern is steel imports and their impact on a depressed domestic steel industry.
NAPM's Purchasing Managers' Index was slightly lower at 52.8 percent in April. NAPM's Production Index decreased 2.0 percentage points from 59.6 percent in March to 57.6 percent in April. NAPM's New Orders Index declined 3.4 percentage points from 58.2 percent in March to 54.8 percent in April. NAPM's Backlog of Orders Index registered 53.0 percent, 1.0 percentage point higher than the 52.0 percent recorded in March.
NAPM's Supplier Deliveries Index moved to 49.4 percent in April down from 52.5 percent in March. The NAPM Employment Index is at 49.5 for April, slightly higher than the 48.0 percent reported in March. NAPM's Price Index in April is 49.9 percent, a significant slowing of the trend of deceleration that started in January 1998.
NAPM's Inventories Index showed continued inventory liquidation and at a slower rate than in March. NAPM's Inventories Index rose to 46.6 percent from 44.6 percent in March. Responding to a special monthly question concerning customers' inventories of products purchased from the purchasers' organizations, 7 percent of the purchasing executives felt they were too high (down from 9 percent in March). On the other hand, 17 percent felt they were too low (down from 22 percent in March) and 76 percent thought they were about right (up from 69 percent in March).
NAPM's New Export Orders Index continued positive for a third month though decreasing 0.1 percentage point to 51.6 percent. Imports of materials by manufacturers continued to increase in April, but at a slower rate as NAPM's Imports Index was down slightly from 55.3 percentage points to 53.4 percent in April.
"The overall picture is one of continuing growth in manufacturing activity during the month of April," added Ore. "Production and New Orders remain quite positive and provide an indication that the manufacturing sector is gaining strength as we move toward the middle of 1999. Employment decline has slowed as the growth in the sector gains momentum. Commodity prices are declining at a slower rate, but only a few commodities appear on the up in price list."
Of the 20 industries in the manufacturing sector, sixteen reported improved business in April. Industries that reported improvement over March were (listed in order): Petroleum; Apparel; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Furniture; Rubber & Plastic Products; Wood & Wood Products; Glass, Stone & Aggregate; Primary Metals; Fabricated Metals; Chemicals; Electronic Components & Equipment; Food; Paper; Industrial & Commercial Equipment & Computers; Transportation & Equipment; and Instruments & Photographic Equipment.
"No commodities appeared on the Short Supply List. Commodities with reports of price increases were Corrugated Containers, Diesel Fuel, Gasoline, Linerboard, Natural Gas, High Density Polyethylene, and Resins. Commodities with reports of price decreases include Aluminum, Caustic Soda, Copper, Plastic, and Steel," Ore stated.
APRIL 1999 NAPM BUSINESS SURVEY AT A GLANCE
Apr vs Mar
|Rate of Change
Apr vs Mar
|Backlog of Orders||53.0||Growing||Faster|
|Supplier Deliveries||49.4||Faster||From Slower|
|New Export Orders||51.6||Growing||Slower|
THE ECONOMY AT A GLANCE
Purchasing Managers' Index (PMI)
The Purchasing Managers' Index (PMI) indicates that the manufacturing economy continued to grow during the month of April with an index of 52.8 percent. This is 1.5 percentage points lower when compared to March and the third 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 April (52.3 percent), corresponds to a 3.0 percent increase in gross domestic product (GDP). However, if the PMI for April (52.8 percent), turned out to be the annual average for 1999, this would corresponds to a 3.2 percent increase in real GDP.
NAPM's Production Index grew in April for the fourth consecutive month, but at a slightly slower rate than it registered for the month of March. NAPM's Production Index in April is 57.6 percent, a decrease of 2.0 percentage points when compared to the March index of 59.6 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 April were (listed in order): Petroleum; Apparel; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Chemicals; Rubber & Plastic Products; Primary Metals; Electronic Components & Equipment; Glass, Stone & Aggregate; Fabricated Metals; Furniture; Wood & Wood Products; Paper; Industrial & Commercial Equipment & Computers; Transportation & Equipment; Instruments & Photographic Equipment; and Food.
NAPM's New Orders Index continued its strong performance, though at a slightly slower rate of growth, with an index of 54.8 percent in April, a decrease of 3.4 percentage points. 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 April, seventeen industries reported higher rates of increase in new orders. They were (listed in order): Petroleum; Glass, Stone & Aggregate; Apparel; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Furniture; Wood & Wood Products; Paper; Primary Metals; Chemicals; Rubber & Plastic Products; Fabricated Metals; Electronic Components & Equipment; Food; Instruments & Photographic Equipment; Industrial & Commercial Equipment & Computers; Printing & Publishing; and Transportation & Equipment.
Backlog of Orders
NAPM's Backlog of Orders Index (not seasonally adjusted) increased in April for the second consecutive month after ten consecutive months of decline. The index recorded 53.0 percent, 1.0 percentage points higher than March. Twelve industries reported an increase in backlog of orders during the month: Furniture; Leather; Rubber & Plastic Products; Primary Metals; Wood & Wood Products; Fabricated Metals; Industrial & Commercial Equipment & Computers; Paper; Chemicals; Printing & Publishing; Electronic Components & Equipment; and Food.
|Backlog of Orders||%Reporting||%Greater||%Same||%Less||Net||Index|
NAPM's Supplier Deliveries Index in April indicates delivery performance accelerated with an index reading of 49.4 percent (a reading below 50 indicates faster delivery performance) after reporting slower for three consecutive months. The industries reporting slower supplier deliveries in April were: Petroleum; Textiles; Rubber & Plastic Products; Electronic Components & Equipment; Fabricated Metals; and Industrial & Commercial Equipment & Computers.
NOTE: A list of commodities in short supply is available at the end of this report.
Manufacturers' inventory activity in April indicated a slower rate of reduction than reported in March. NAPM's Inventories Index for April rose to 46.6 percent from 44.6 percent in March. This continues a long-term trend of inventory reduction by manufacturers. 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 industries reporting higher inventories in April over March were: Furniture; Apparel; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Food; and Fabricated Metals.
NAPM's Manufacturing Employment Index 49.5 percent in April from 48.0 percent in March, an increase of 1.5 percentage points. This is the eleventh consecutive month in which manufacturing employment has failed to grow. 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. Ten industries indicated growth in employment and they were: Apparel; Tobacco; Rubber & Plastic Products; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Furniture; Wood & Wood Products; Food; Fabricated Metals; Electronic Components & Equipment; and Transportation & Equipment.
NAPM's Price Index attained its highest level since December 1997, but still failed to indicate higher prices overall. NAPM's Price Index gained 6.7 percentage points to 49.9 percent, up from 43.2 percent in March. The index indicates lower prices paid by manufacturers for the sixteenth consecutive month. In April, 15 percent of purchasing executives reported paying higher prices, 19 percent reported paying lower prices, while 66 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 industries reporting paying higher prices were: Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Glass, Stone & Aggregate; Food; Textiles; Printing & Publishing; and Transportation & Equipment.
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 April continued positive for the third consecutive month following fourteen months of decline (an index exceeding 50 percent) with an index of 51.6 percent. NAPM's New Export Orders Index declined 0.1 percentage point during the month. Industries reporting growth in new export orders in April were: Petroleum; Wood & Wood Products; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Paper; Fabricated Metals; Chemicals; Rubber & Plastic Products; Electronic Components & Equipment.
|New Export Orders||%Exporting||%Better||%Same||%Worse||Net||Index|
Imports of materials by manufacturers continued to grow in April with an index of 53.4 percent. However, the rate of growth is 1.9 percentage points lower than the 55.3 percent reported in March. The eight industries reporting growth in import activity for April were: Leather; Miscellaneous
(a preponderance of jewelry, toys, sporting goods, musical instruments); Fabricated Metals; Rubber & Plastic Products; Printing & Publishing; Food; Industrial & Commercial Equipment & Computers; and Transportation & Equipment.
Average commitment leadtime for Capital Expenditures rose to 115 days in April, up 5 days from March. Average leadtime for Production Materials is 45 days, down 1 day from March. Average leadtime for Maintenance, Repair, and Operating (MRO) supplies declined to 24 days, down 4 days from March.
In Short Supply
No commodities reported in short supply.
Up in Price
Corrugated Containers(2nd month); Diesel Fuel; Gasoline; Linerboard (2nd month); Natural Gas; High Density Polyethylene; and Resins.
Down in Price
Aluminum — 18th month; Caustic Soda — 7th month; Copper — 22nd month; Plastic; and Steel — 10th month.
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 181affiliates with more than 44,000 members in the United States and Puerto Rico. The report has been issued by the association since 1931.
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. (EDT)
The next Manufacturing NAPM Report On Business® featuring the May 1999 data will be released at 10:00 a.m. (EDT) on June 1, 1999.