FOR RELEASE: November 1, 1999
|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 October 1999.
(Tempe, Arizona) — Economic activity in the manufacturing sector grew for the ninth consecutive month in October. The overall economy continued to grow in October for the 102nd 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 grow in October though at a slower rate than it grew in September. Both production and new orders grew, but at a decelerating rate during the month while NAPM's Price Index continued its upward climb hitting the highest level in more than four years, indicating that manufacturers continue to pay higher prices 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 October as the index rose above the breakeven point (an index of 50) for the third consecutive month. NAPM's Price Index continued to strengthen as 15 of 20 industries indicated paying higher prices on average during October. Export Orders and Imports continue to grow, however, their rates of growth are slower when compared to September. Purchasing Managers are generally content with the economy at present. Concerns expressed this month included Y2K inventory demand and disruptions from the hurricanes.
NAPM's Purchasing Managers' Index was lower at 56.6 percent in October, down from 57.8 in September. NAPM's Production Index decreased 3.4 percentage points from 61.7 percent in September to 58.3 percent in October. NAPM's New Orders Index declined 4.9 percentage points from 64.4 percent in September to 59.5 percent in October. NAPM's Backlog of Orders Index registered 54.0 percent, 0.5 percentage point lower than the 54.5 percent recorded in September. NAPM's Supplier Deliveries Index rose to 56.6 percent in October up from 55.9 percent in September. The NAPM Employment Index is at 52.8 for October, an increase of 1.3 percentage points when compared to 51.5 percent reported in September. NAPM's Price Index in October is 69.4 percent, an increase of 1.8 percentage points from September.
NAPM's Inventories Index reversed a lengthy trend of liquidation, and rose above 50 (breakeven) for the first time since November 1988, rising to 51.1 percent from 43.2 percent in September. 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 (same as September). On the other hand, 18 percent felt they were too low (down from 20 percent in September) and 75 percent thought they were about right (up from 73 percent in September).
NAPM's New Export Orders Index continued positive for the ninth consecutive month while decreasing 4.2 percentage points to 52.4 percent. Imports of materials by manufacturers continued to grow in October, at a decelerating rate, as NAPM's Imports Index was down from 55.7 percent to 54.3 percent.
"The overall picture is one of continuing growth in manufacturing activity during the month of October," added Ore. "Production and New Orders continue to provide momentum and coupled with the continuing strength in New Export Orders, the manufacturing sector is definitely in a strong growth mode. Prices continue to strengthen in many commodities."
Of the 20 industries in the manufacturing sector, fourteen reported improved business in October. Industries that reported improvement over September were (listed in order): Electronic Components & Equipment; Tobacco; Printing & Publishing; Paper; Furniture; Transportation & Equipment; Industrial & Commercial Equipment& Computers; Fabricated Metals; Petroleum; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Food; Glass, Stone & Aggregate; Primary Metals; and Chemicals.
"Electronic Components were the only commodities reported on the Short Supply List. Commodities with reports of price increases were Aluminum, Caustic Soda, Chlorine, Coated Papers, Copper, Corrugated Containers, Fuel Oil, Gasoline, Linerboard, Metals, Natural Gas, Paper, Paper Products, High Density Polyethylene, Polyethylene, Polyethylene Resin, Polypropylene, Propylene, Resins, Solvents, Stainless Steel, Steel, Styrene, and Wood Pulp. Natural Gas is the only commodity down in price," Ore stated.
Oct vs Sep
|Rate of Change
Oct vs Sep
|Backlog of Orders||54.0||Growing||Slower|
|New Export Orders||52.4||Growing||Slower|
The Purchasing Managers' Index (PMI) indicates that the manufacturing economy continued to grow during the month of October, but at a slower rate, with an index of 56.6 percent. This is 1.2 percentage points lower when compared to September and the ninth 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 October (54.3 percent), corresponds to a 3.7 percent increase in gross domestic product (GDP). However, if the PMI for October (56.6 percent), turned out to be the annual average for 1999, this would correspond to a 4.5 percent increase in real GDP.
NAPM's Production Index grew in October for the tenth consecutive month, but at a slower rate of growth than it registered for the month of September. NAPM's Production Index in October is 58.3 percent, a decrease of 3.4 percentage points when compared to the September index of 61.7 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 October were (listed in order): Electronic Components & Equipment; Tobacco; Paper; Fabricated Metals; Industrials & Commercial Equipment and Computers; Printing & Publishing; Petroleum; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Transportation & Equipment; and Food.
NAPM's New Orders Index grew at a decelerating rate in October with an index of 59.5 percent, a decrease of 4.9 percentage points when compared to September. 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 October, thirteen industries reported higher rates of increase in new orders. They were (listed in order): Electronic Components & Equipment; Tobacco; Paper; Furniture; Printing & Publishing; Glass, Stone & Aggregate; Petroleum; Transportation & Equipment; Industrial & Commercial Equipment & Computers; Primary Metals; Food; Fabricated Metals; and Chemicals.
The Backlog of Orders Index grew in manufacturer's leadtimes when compared to September, however, at a slightly slower rate. This is the eighth consecutive month that NAPM's Backlog of Orders Index (not seasonally adjusted) has been above 50 percent. The index recorded 54.0 percent, 0.5 percentage point lower than September. Nine industries reported an increase in backlog of orders during the month: Electronic Components & Equipment; Glass, Stone & Aggregate; Paper; Furniture; Printing & Publishing; Transportation & Equipment; Food; Primary Metals; and Industrial & Commercial Equipment & Computers.
NAPM's Supplier Deliveries Index in October indicates delivery performance continued to slow with an index reading of 56.6 percent (a reading below 50 indicates faster delivery performance). The index is 0.7 percentage point higher than September. October marks the sixth consecutive month that the index has registered above 50. The industries reporting slower supplier deliveries in October were: Electronic Components & Equipment; Primary Metals; Industrial & Commercial Equipment & Computers; Furniture; Printing & Publishing; Food; Chemicals; Rubber & Plastic Products; Instruments & Photographic Equipment; and Paper.
NOTE: A list of commodities in short supply is available at the end of this report.
Manufacturers' inventories grew in October as the Inventories Index rose to 51.1 percent from 43.2 percent in September. This is the first time since November 1988 that the Inventories Index has been above 50. The long-term trend has included a major bias toward 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 five industries reporting higher inventories in October over September were: Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Textiles; Chemicals; Printing & Publishing; and Fabricated Metal Products.
NAPM's Manufacturing Employment Index rose above 50 in October for the third consecutive month. The index registered 52.8 percent in October compared to 51.5 percent in September, an increase of 1.3 percentage points. 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. Seven industries indicated growth in employment and they were: Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Food; Transportation & Equipment; Furniture; Fabricated Metals; Printing & Publishing; and Industrial & Commercial Equipment & Computers.
NAPM's Price Index gained 1.8 percentage points to 69.4, rising above the 50 mark for the sixth consecutive month. The index indicates higher prices paid by manufacturers during October when compared to September, and the highest the index has been since May 1995. In October, 45 percent of purchasing executives reported paying higher prices, 4 percent reported paying lower prices, while 51 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 fifteen industries paying higher prices were: Textiles; Printing & Publishing; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Petroleum; Paper; Chemicals; Instruments & Photographic Equipment; Primary Metals; Transportation & Equipment; Electronic Components & Equipment; Industrial & Commercial Equipment & Computers; Fabricated Metals; Rubber & Plastic Products; Furniture; and Food.
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 October continued positive (an index exceeding 50 percent) for the ninth consecutive month. NAPM's New Export Orders Index declined 4.2 percentage points to 52.4 for the month of October. Industries reporting growth in new export orders in October were: Tobacco; Electronic Components & Equipment; Transportation & Equipment; Industrial & Commercial Equipment & Computers; and Chemicals.
Imports of materials by manufacturers continued to grow in October at a decelerating rate with an index of 54.3 percent. The Imports Index is 1.4 percentage points lower than September's report of 55.7 percent. The ten industries reporting growth in import activity for October were: Leather; Glass, Stone & Aggregate; Furniture; Electronic Components & Equipment; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Printing & Publishing; Primary Metals; Fabricated Metals; Industrial & Commercial Equipment & Computers; and Chemicals.
Average commitment leadtime for Capital Expenditures rose by 2 days to 114 days in October. Average leadtime for Production Materials declined 1 day to 43 days. Average leadtime for Maintenance, Repair, and Operating (MRO) supplies rose to 25 days, up 2 days from September.
Aluminum — 6th month; Caustic Soda — 2nd month; Chlorine; Coated Paper; Copper — 4th month; Corrugated Containers — 8th month; Fuel Oil; Gasoline — 2nd month; Linerboard — 8th month; Metals; Natural Gas — 7th month (also noted down in price); Paper — 5th month; Paper Products; High Density Polyethylene — 7th month; Polyethylene — 2nd month; Polyethylene Resin; Polypropylene — 6th month; Propylene; Resins — 2nd month; Solvents; Stainless Steel — 3rd month; Steel — 3rd month; Styrene; and Wood Pulp — 3rd month.
Natural Gas (also noted up in price).
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 November 1999 data will be released at 10:00 a.m. (ET) on December 1, 1999.