60th Semiannual Economic Forecast

FOR RELEASE: December 12, 2000

Contact: Kristen Kioa
  NAPM, Media Relations
  Tempe, Arizona
  800/888-6276, Ext. 3015
OVERALL ECONOMIC GROWTH TO CONTINUE IN 2001
Manufacturing Weakness Continues,
Capacity 82.2%, Capital Spending up 1.8%
Second Half of 2001 Predicts to be Stronger
Non-Manufacturing Continues Strong
Non-Manufacturing Forecast Revenue Growth of 6.9 %
Capacity Utilization of 87.4%

(New York, NY) — Economic growth in the U.S. will continue into 2001, say the nation's purchasing executives in their 60th Semiannual Economic Forecast. Expectations are high in the non-manufacturing sector, but the manufacturing sector is less optimistic about the coming year. While this is somewhat of a mixed message, the overall prediction is for continuation of the economic growth cycle that is now in its 116th consecutive month of growth.

These projections are part of the forecast issued by the Business Survey Committee of the National Association of Purchasing Management, Inc. (NAPM). The forecast was presented today by Norbert J. Ore, C.P.M., chair of the NAPM Manufacturing Business Survey Committee and vice president of purchasing and strategic alliances, Chesapeake Display & Packaging; and by Ralph G. Kauffman, Ph.D., C.P.M., chair of the NAPM Non-Manufacturing Business Survey Committee and coordinator of the purchasing and supply management program at the University of Houston-Downtown.

Manufacturing Summary

Looking forward to 2001, 66 percent of survey respondents expect their 2001 revenues to be greater than in 2000 when 81percent expected revenues to be greater than in 1999. However, the panel of purchasing executives expects a 4.4 percent net increase in overall revenues compared to an actual 4 percent increase reported for 2000. Manufacturing industries expecting the greatest improvement over 2000 are — listed in order — Electronic Components & Equipment; Chemicals; Instruments & Photographic Equipment; Industrial & Commercial Equipment & Computers; Rubber & Plastic Products; Furniture; Food; Printing & Publishing; Tobacco; and Miscellaneous*.

"Manufacturing purchasers are less than bullish about their organizations' prospects for 2000. Contrary to last year at this time when Y2K was the major worry, purchasers are now facing higher interest rates, higher energy costs, a stronger dollar, slower growth in the U.S. and Europe, excess capacity in the basic materials segment, more foreign competition, and inflation. 2001 will definitely be a challenge as far as the manufacturing sector is concerned."

In the sector, purchasers report operating at 82.2 percent of their normal capacity, down significantly from 85.4 percent reported in December 1999. Purchasing executives predict that capital expenditures will increase 1.8 percent in 2000 compared to the December 1999 prediction of a 5.6 percent decrease. Purchasers also forecast that they will continue to reduce their purchased inventory to sales ratio, while expecting manufacturing employment to decline by 0.5 percent. They also forecast an average 2.6 percent increase in overall labor and benefits costs for 2001. Manufacturing purchasers are predicting growth in exports and imports, but at decelerating rates, and expect the U.S. dollar to remain strong against the currencies of major trading partners.

They predict the prices they pay will decrease 0.2 percent during the first four months of 2001 and will increase a meager 0.2 percent for the balance of 2001, resulting in no change in prices during the upcoming year. Respondents major concerns are energy costs, a weak economy, labor and benefit costs, interest rates, and inflation.

This forecast includes results of a special question asking if purchaser's companies are able to pass through wage and commodity increases. Eighty-six percent indicated they are either unable to do so or are able to pass through a few of the increases they receive, an increase of 5 percent when compared to last year. The other 13 percent indicated that they are able to recover all or most, and 1 percent are not experiencing increases.

Non-Manufacturing Summary

"A significant 71 percent of non-manufacturing purchasing executives expect their 2001 revenues to be greater than in 2000. They currently expect a 6.9 percent net increase in overall revenues compared to a 6.1 percent increase reported for 2000," said Kauffman. Non-manufacturing industries expecting the greatest improvement over 2000 are — listed in order — Real Estate; Insurance; Communication; Utilities; Construction; and Business Services.

Non-manufacturing purchasers report operating at 87.4 percent of their normal capacity, slightly below the 87.8 percent reported in May 2000. They also forecast that they will increase their capacity to produce products and provide services by 5.9 percent during 2001 and that employment will increase by 2.7 percent in the coming year. Purchasers expect capital expenditures to increase by 1.5 percent in 2001, down from a 6 percent increase reported for 2000. Their major economic concerns are increased costs and inflation, labor and benefit costs, and higher interest rates.

Purchasers in non-manufacturing industries, reflecting their concern about increased costs, predict that the prices they pay for materials and services will increase 3.2 percent during 2001, up from 2.5 percent reported for 2000. They also forecast a 3.9 percent increase in their overall labor and benefit costs for 2001. They reported decreased profit margins in the second and third quarters of 2000 but expect margins to increase in the first four months of 2001. Members indicate that they have achieved about 57 percent of potential benefits from application of technology to supply chains and that electronic commerce is their number one means of improving supply chains in 2001.


OPERATING RATE

Manufacturing

Purchasing executives report that their companies are currently operating at 82.2 percent of normal capacity. The decrease from 87.4 percent reported in May 2000 is the largest decline reported since the inception of this measure in 1985 and consistent with the decline experienced by the manufacturing sector in recent months. The following industries are operating at the highest levels of capacity: Miscellaneous*; Chemicals; Food; Paper; Petroleum; Glass, Stone & Aggregate; Electronic Components & Equipment; and Furniture.

Non-Manufacturing

Non-manufacturing purchasing executives report that their organizations are currently operating at 87.4 percent of normal capacity. This is very slightly less than the 87.8 percent reported in May 2000, and the 88.2 percent reported in December 1999. Considering capacity increases reported in the following section of this forecast, this indicates that non-manufacturing industries are continuing to grow, utilizing capacity additions at almost the same rate as the capacity that existed one year ago. The following industries are operating at the highest levels of capacity: Insurance; Legal Services; Public Administration; Finance and Banking; Retail Trade; Other Services**; and Health Services.

Operating Rate
  Manufacturing Non-Manufacturing
  Dec '99 May '00 Dec '00 Dec '99 May '00 Dec '00
90%+ 51% 53% 41% 66% 61% 59%
50%-89% 46% 45% 57% 33% 38% 39%
Below 50% 3% 2% 2% 1% 1% 2%
Est. Overall Average 85.4% 87.4% 82.2% 88.2% 87.8% 87.4%


PRODUCTION CAPACITY

Manufacturing

Production capacity in manufacturing is expected to increase 5.3 percent in 2001 as 57 percent of purchasing executives reported an average capacity increase of 10.5 percent, 6 percent reported decreases averaging 11.2 percent, and 37 percent reported no change. This compares to a capacity increase of 4.6 percent for all of 2000 and a predicted increase of 5.1 percent for 2000 made in December 1999. The principal means of achieving increases in production capacity in 2000 are — in order of importance:

  1. Additional plant and/or equipment
  2. Replace equipment with technically advanced equipment
  3. More hours worked with existing personnel
  4. More shifts worked with existing personnel
  5. Fewer shutdowns
Manufacturing Production Capacity Change
  For 2000 For 2000 For 2001
  Predicted
May 2000
Magnitude
of Change
Reported
Dec 2000
Magnitude
of Change
Predicted
Dec 2000
Magnitude
of Change
Higher 53% +10% 55% +11.2% 57% +10.5%
Same 42% NA 34% NA 37% NA
Lower 5% -14.2% 11% -13.3% 6% -11.2%
Net Average   +4.5%   +4.6%   5.3%

Non-Manufacturing

The capacity to produce products or provide services in the non-manufacturing sector is expected to increase 4.6 percent during 2000. This compares to a predicted rise of 5.7 percent in May 2000 and growth of 4.2 percent reported for 1999.

For 2001, 52 percent of non-manufacturing purchasers expect their capacity to increase by an average of 11.8 percent, and 2 percent of respondents foresee their capacity decreasing by the same average. Including the 46 percent expecting no change in their capacity, an overall net average increase of 5.9 percent is predicted for 2001.

The principal means of achieving increases in production or provision capacity in 2000 were — in order of importance:

  1. Additional personnel (permanent, temporary, or contract)
  2. Replaced equipment with technically advanced equipment
  3. More hours worked with existing personnel
  4. Additional plant and/or equipment
  5. Fewer shutdowns
Non-Manufacturing Production or Provision Capacity Change
  For 2000 For 2000 For 2001
  Predicted
May 2000
Magnitude
of Change
Reported
Dec 2000
Magnitude
of Change
Predicted
Dec 2000
Magnitude
of Change
Higher 54% +11.6% 44% +11.8% 52% +11.8%
Same 41% NA 52% NA 46% NA
Lower 5% -13.1% 4% -14.6% 2% -11.8%
Net Average   +5.7%   +4.6%   +5.9%


CAPITAL EXPENDITURES — 2000 vs. 1999

Manufacturing

Purchasers report capital expenditures in 2000 at 4.9 percent over 1999 levels. This is the lowest increase reported since 1991 and is consistent with the deceleration that has occurred in the sector during 2000. Though less than robust, the showing for 2000 does exceed our members' expectations as they predicted only a slight increase of 0.7 percent for 2000 in the May 2000 forecast. The 38 percent of purchasers who reported increased capital expenditures in 2000 indicated an average increase of 33.2 percent, while the 31 percent who said their capital spending was reduced reported an average decrease of 24.7 percent. Thirty-one percent said they spent the same as in 1999. Industries showing the greatest increase are: Industrial & Commercial Equipment & Computers; Glass, Stone & Aggregate; Food; Rubber & Plastic Products; Transportation & Equipment; Chemicals; and Electronic Components & Equipment.

Manufacturing Capital Expenditures — 2000 vs. 1999
  Predicted
Dec '99
Magnitude
of Change
Predicted
May '00
Magnitude
of Change
Reported
Dec '00
Magnitude
of Change
Higher 37% +34% 36% +27.6% 38% +33.2%
Same 35% NA 36% NA 31% NA
Lower 28% -65% 28% -33.2% 31% -24.7%
Net Average   -5.6%   +0.7%   +4.9%

Non-Manufacturing

Capital expenditures in non-manufacturing organizations in 2000 rose 6 percent over the 1999 level. This was a larger increase than the 1.1 percent predicted in May 2000 and larger than the actual increase of 4.7 percent reported for 1999 in December 1999. The 49 percent of non-manufacturing purchasing executives who reported an increase in capital expenditures in 2000 indicated an average increase of 22.2 percent, while the 19 percent who said their capital spending was reduced reported an average decrease of 25.6 percent. Including the 32 percent who said they spent the same as in 1999, the overall net average increase is 6 percent. Industries indicating the largest increases — in order of percentage increase — in capital spending in 2000 are: Insurance; Legal Services; Other Services**; Real Estate; and Communication.

Non-Manufacturing Capital Expenditures — 2000 vs. 1999
  Predicted
Dec '99
Magnitude
of Change
Predicted
May '00
Magnitude
of Change
Reported
Dec '00
Magnitude
of Change
Higher 44% +30% 42% +18.5% 49% +22.2%
Same 34% NA 35% NA 32% NA
Lower 22% -21% 23% -28.4% 19% -25.6%
Net Average   +8.7%   +1.1%   +6.0%


PREDICTED CAPITAL EXPENDITURES — 2001 vs. 2000

Manufacturing

Looking forward, purchasing executives are expecting little overall growth in capital expenditures in 2001. The 29 percent of members expecting to spend more on capital expenditures in 2001 predict an average increase of 44.9 percent. However, 32 percent expect a decrease averaging 34.9 percent. Considering the 39 percent who expect to spend the same on capital expenditures in both years, the overall net average change forecast for 2001 is an increase of 1.8 percent. Industries expecting higher capital expenditures in 2001 over 2000 are — in order of percentage increase — Industrial & Commercial Equipment & Computers; Electronic Components & Equipment; Chemicals; Transportation & Equipment; Instruments & Photographic Equipment; and Paper.

Non-Manufacturing

Looking ahead, non-manufacturing purchasing executives are expecting to increase their level of capital expenditures in 2001 compared to 2000. However, the amount of increase is 1.5 percent, only one-quarter of the growth reported for 2000. The 41 percent of members expecting to spend more predict an average increase of 17.5 percent. An additional 24 percent anticipate a decrease averaging 23.2 percent. Considering the 35 percent who expect to spend the same on capital expenditures in 2001 as in 2000, the overall net average change forecast for 2001 is an increase of 1.5 percent. Industries expecting the largest percentage increases — in order of percentage increase — in capital expenditures in 2001 over 2000 are: Health Services; Construction; Communication; Business Services; and Other Services**.

Predicted Capital Expenditures 2001 vs. 2000
  Manufacturing Non-Manufacturing
  Predicted
December '00
Magnitude
of Change
Predicted
December '00
Magnitude
of Change
Higher 29% +44.9% 41% +17.5%
Same 39% NA 35% NA
Lower 32% -34.9% 24% -23.2%
Net Average   +1.8%   +1.5%


PRICES — Changes Between End of 1999 and End of 2000

Manufacturing

After an initial forecast in December 1999 of a 1.5 percent increase in prices paid during 2000, purchasers increased that forecast to 2.6 percent in NAPM's May 2000 report. They now report an increase of 0.6 percent for all of 2000. The 52 percent who say their prices are higher now than at the end of 1999 report an average increase of 4.9 percent, while the 34 percent who report lower prices averaged 5.6 percent, the remaining 14 percent indicate no change for all of 2000.

Manufacturing Price Changes Between End of 1999 and End of 2000
  Predicted
Dec '99
Magnitude
of Change
Predicted
May '00
Magnitude
of Change
Reported
Dec '00
Magnitude
Of Change
Higher 61% +4.3% 69% +5.2% 52% +4.9%
Same 12% NA 8% NA 14% NA
Lower 27% -4.2% 23% -4.0% 34% -5.6%
Net Average   +1.5%   +2.6%   +0.6%

Non-Manufacturing

Prices paid by non-manufacturing industries in 2000 are reported to have increased by 2.5 percent compared to their level at the end of 1999. This is a decrease from the 4.6 percent rise predicted in May 2000 but an increase from the 1.3 percent growth reported for 1999 in December 1999. The 67 percent of non-manufacturing purchasing executives who say their prices are higher now than at the end of 1999 report an average increase of 5.4 percent, while the 14 percent who report lower prices indicate an average drop of 7.7 percent. After including the 19 percent who indicate no change, the purchasers reported a net average overall price increase of 2.5 percent for all of 2000.

Non-Manufacturing Price Changes Between End of 1999 and End of 2000
  Predicted
Dec '99
Magnitude
of Change
Predicted
May '00
Magnitude
of Change
Reported
Dec '00
Magnitude
of Change
Higher 63% +4.8% 74% +7.1% 67% +5.4%
Same 18% NA 17% NA 19% NA
Lower 19% -5.3% 9% -7.1% 14% -7.7%
Net Average   +2.1%   +4.6%   +2.5%


PRICES — Predicted Changes Between End of 2000 and April of 2001

Manufacturing

Forty percent of purchasers expect prices they pay to increase in the first part of 2000 by 3 percent. At the same time, 25 percent anticipate decreases averaging 5.8 percent. Including the 35 percent who expect no change in prices in the first four months of 2001, purchasers expect the net average overall price change to decrease 0.2 percent for the period. Industries predicting increases in prices paid for the first part of 2001 are: Textiles; Food; Tobacco; Printing & Publishing; Paper; Instruments & Photographic Equipment; Electronic Components & Equipment; and Apparel.

Non-Manufacturing

Sixty percent of non-manufacturing purchasers expect the prices they pay to increase 4.5 percent in the first part of 2001. Also, 7 percent anticipate price decreases averaging 6 percent. Including the 33 percent who expect no change in prices in the first four months of 2001, the net average overall price change is anticipated to be an increase of 2.3 percent for the period. Industries predicting the largest increase in prices they pay in the first part of 2001 are: Agriculture; Construction; Insurance; Public Administration; Wholesale Trade; and Other Services**.

Prices — Predicted Changes Between End of 2000 and April of 2001
  Manufacturing Non-Manufacturing
  Predicted
December '00
Magnitude
of Change
Predicted
December '00
Magnitude
of Change
Higher 40% +3.0% 60% +4.5%
Same 35% NA 33% NA
Lower 25% -5.8% 7% -6.0%
Net Average   -0.2%   +2.3%


PRICES — Predicted Changes Between End of 2000 and End of 2001

Manufacturing

When asked to indicate their expectation for price changes in 2001, 58 percent expect an average price increase of 3.4 percent, while 29 percent expect an average decline of 6.6 percent. The remaining 13 percent expect no change in their average for the coming year. The net average of the responses indicates an increase of 0.1 percent overall by the end of 2001. Industries expecting to pay higher overall prices in 2001 are: Textiles; Tobacco; Paper; Food; Wood & Wood Products; Apparel; Printing & Publishing; Industrial & Commercial Equipment & Computers; and Instruments & Photographic Equipment.

Non-Manufacturing

Looking out to the end of 2001, non-manufacturing purchasers expect prices they pay to increase an additional moderate amount in the last part of the year resulting in an overall increase for the entire year of 3.2 percent. Seventy-one percent of purchasers anticipate price increases with an average increase of 5.2 percent. Ten percent of purchasers expect decreased prices with an average reduction of 5.4 percent and 19 percent of members do not expect prices to change, resulting in a 3.2 percent overall average price increase for the year.

Predicted Price Changes Between End of 2000 and End of 2001
  Manufacturing Non-Manufacturing
  Predicted
Dec '00
Magnitude
of Change
Predicted
Dec '00
Magnitude
of Change
Higher 58% +3.4% 71% +5.2%
Same 13% NA 19% NA
Lower 29% -6.6% 10% -5.4%
Net Average   +0.1%   +3.2%


LABOR AND BENEFIT COSTS — Predicted Rate Change End of 2000 vs. End of 2001

Manufacturing

Purchasing executives' expectation for change in overall labor and benefit costs for 2001 are slightly higher than they were in December 1999 for 2000. Eight-two percent of members who expect increased labor and benefit costs expect them to grow by an average of 3.9 percent for all of 2000, while the 3 percent forecasting lower costs see them decreasing by an average 21.3 percent. Including consideration of the 15 percent who believe costs will remain stable, the expected overall net rate of increase is 2.6 percent between the end of 2000 and the end of 2001. Nineteen of 20 industries expect higher labor and benefits costs in 2001; Primary Metals was the only industry forecasting lower costs. Industries expecting to pay 3.5 percent or higher are: Electronic Components & Equipment; Paper; Rubber & Plastic Products; Printing & Publishing; Food; Petroleum; Instruments & Photographic Equipment; and Glass, Stone & Aggregate.

Non-Manufacturing

Purchasing executives' expectations for change in labor and benefit costs for non-manufacturing industries in 2001 include 78 percent of respondents who expect such costs to increase by an average 5.7 percent. Another 4 percent of purchasers expect labor and benefit costs to shrink by an average 11.6 percent. Including the 18 percent who believe costs will remain stable during 2001, the expected overall net average rate of increase is 3.9 percent. Industries expecting the largest increases in labor and benefit costs in 2001 over 2000 are: Insurance; Agriculture; Health Services; Communication; Legal Services; and Other Services**.

Labor and Benefit Costs — Predicted Rate Change
End of 2000 vs. End of 2001
  Manufacturing Non-Manufacturing
  Predicted
Dec '00
Magnitude
of Change
Predicted
Dec '00
Magnitude
of Change
Higher 82% +3.9% 78% +5.7%
Same 15% NA 18% NA
Lower 3% -21.3% 4% -11.6%
Net Average   +2.6%   +3.9%


EMPLOYMENT

Manufacturing

NAPM's Manufacturing Business Survey Committee members forecast that manufacturing employment will decline 0.5 percent in 2001, with 26 percent expecting employment to be 6.5 percent higher. This is compared to the 22 percent who predicted employment to be lower by 9.5 percent. The remaining 52 percent of members expect their employment levels to be unchanged in 2001. Industries reporting more than 2 percent growth in employment are: Instruments & Photographic Equipment and Miscellaneous*. Primary Metals, Apparel, and Textiles predict a decline in employment of 5 percent or greater.

Non-Manufacturing

NAPM's Non-Manufacturing Business Survey Committee members report that non-manufacturing employment has increased 0.7 percent since May 2000 and forecast that employment will increase 2.7 percent in 2001. For 2001, 46 percent expect greater numbers of workers, 16 percent of members anticipate fewer workers, and 38 percent expect their employment levels to be unchanged in 2001 from 2000 levels. Industries anticipating the greatest percentage increase in their employment in 2001 are: Real Estate; Insurance; Construction; Retail Trade; Legal Services; Other Services**; and Communication.

Predicted Change in Overall Employment
  Manufacturing Non-Manufacturing
  Predicted
For 2001
Dec '00
Nominal %
Change
Predicted
For 2001
Dec '00
Nominal %
Change
Higher 26% +6.5% 46% +8.8%
Same 52% NA 38% NA
Lower 22% -9.5% 16% -8.8%
Net Average   -0.5%   +2.7%
Diffusion Index 52%   65%  

Note: A diffusion index above 50 percent would generally indicate an expectation of higher employment; below 50 percent, an expectation of lower employment.


EXPORT BUSINESS — Predicted Change for Next Half Year (First Half of 2001)

Manufacturing

The responses for this semiannual report indicate purchasers are feeling moderately optimistic about new export orders for the first half of 2001. However, NAPM's New Export Orders Index in the monthly Manufacturing NAPM Report On Business® recently has shown a downward trend in new export orders. Of the 80.2 percent of members who export, only 42 percent predict an increase (39 percent moderate and 3 percent substantial) over the next half year, which is significantly less than the 57 percent in NAPM's May 2000 forecast. Presently, 11 percent (11 percent moderate, 0 percent substantial) see a decrease in their exports and 47 percent anticipate no change in exports over the next half year. Industries expecting above average growth in exports are: Petroleum; Instruments & Photographic Equipment; Furniture; Paper; Textiles; Electronic Components & Equipment; Food; Fabricated Metals; Apparel; and Glass, Stone & Aggregate.

Non-Manufacturing

For the next half year, non-manufacturing purchasing executives who report that their organizations engage in exporting feel moderately optimistic concerning their export business. Of the 23 percent of non-manufacturing business survey respondents who export, 43 percent predict an increase (38 percent moderate and 5 percent substantial) over the next half-year. Five percent of members see a decrease in their exports (3 percent moderate and 2 percent substantial), and 52 percent anticipate no change in exports over the next half year. Industries expecting the largest growth in export business are: Communication; Other Services**; Construction; Utilities; and Retail Trade.

Predicted Change in Export Business — Next Half Year
  Manufacturing Non-Manufacturing
  For 2000 For 2001 For 2000 For 2001
  Dec '99 May '00 Dec '00 Dec '99 May '00 Dec '00
Substantial Increase 5% 5% 3% 8% 6% 5%
Moderate Increase 54% 52% 39% 54% 40% 38%
No Change 34% 38% 47% 38% 54% 52%
Moderate Decrease 6% 3% 11% 0% 0% 3%
Substantial Decrease 1% 2% 0% 0% 0% 2%
Diffusion Index 76% 76% 65.5% 81% 73% 69%


IMPORT BUSINESS — Predicted Change for Next Half Year (First half of 2001)

Manufacturing

Purchasers expect continued growth in imports. Of the 82.9 percent of purchasers who import, 41 percent predict an increase in their imports over the next half year (35 percent moderate and 6 percent substantial), while 13 percent predict a decrease in imports of materials (12 percent moderate and 1 percent substantial). Less than half of survey members (46 percent) expect no change in imports. Industries expecting above average growth in imports are: Printing & Publishing; Textiles; Furniture; Apparel; Industrial & Commercial Equipment & Computers; Miscellaneous*; Chemicals; and Instruments & Photographic Equipment.

Non-Manufacturing

Of the 37 percent of non-manufacturing purchasers who import, 38 percent predict an increase in their imports over the next half year (33 percent moderate and 5 percent substantial). Fourteen percent predict a decrease in imports of materials and services (12 percent moderate and 2 percent substantial). The remaining 48 percent of purchasers expect no change in imports over the next half year. Industries expecting the greatest growth in imports are: Mining; Other Services**; Entertainment; Transportation; and Wholesale Trade.

Predicted Change in Import Business — Next Half Year
  Manufacturing Non-Manufacturing
  For 2000 For 2001 For 2000 For 2001
  Dec '99 May '00 Dec '00 Dec '99 May '00 Dec '00
Substantial Increase 6% 10% 6% 7% 4% 5%
Moderate Increase 35% 39% 35% 23% 41% 33%
No Change 49% 44% 46% 61% 52% 48%
Moderate Decrease 9% 6% 12% 7% 3% 12%
Substantial Decrease 1% 1% 1% 2% 0% 2%
Diffusion Index 65.5% 71% 64% 60.5% 71% 62%


BUSINESS REVENUES

Business Revenues Comparison — 2000 vs. 1999

Manufacturing

Summarizing revenues for 2000, 62 percent say it was better then 1999, and that their nominal (before adjusting for inflation) revenues increased an average of 10.8 percent over 1999. Conversely, 21 percent say their nominal revenues decreased in 2000 by an average of 12.1 percent, and the remaining 17 percent indicate no change. Purchasing executives indicate an overall net nominal increase of 4 percent in business revenues for 2000 over 1999. This is lower than the 5.9 percent increase that was forecast in May 2000 for all of 2000, and significantly lower than the 7.7 percent predicted in December 1999.

Manufacturing Business Revenues — 2000 vs. 1999
  Predicted
Dec '99
Nominal
% Change
Predicted
May '00
Nominal
% Change
Reported
Dec '00
Nominal
%Change
Higher 81% +10.2% 72% +10.5% 62% +10.8%
Same 14% NA 13% NA 17% NA
Lower 5% -9.8% 15% -11.2% 21% -12.1%
Net Average   +7.7%   +5.9%   +4.0%

Non-Manufacturing

Looking back on 2000, 64 percent of non-manufacturing purchasing executives say it was better than 1999 and that their nominal (without adjusting for inflation) revenues increased by an average 12.3 percent over 1999. Conversely, 15 percent say their nominal revenues decreased in 2000 by an average 11.9 percent. Including the 21 percent who say revenues were about the same in both years, members say they experienced an overall net nominal increase of 6.1 percent for 2000 over 1999. This result is slightly below the 6.4 percent forecast in May 2000 and the 6.9 percent forecast in December 1999.

Non-Manufacturing Business Revenues — 2000 vs. 1999
  Predicted
Dec '99
Nominal
% Change
Predicted
May '00
Nominal
% Change
Reported
Dec '00
Nominal
%Change
Higher 77% +9.6% 74% +10.0% 64% +12.3%
Same 13% NA 18% NA 21% NA
Lower 10% -5.9% 8% -12.3% 15% -11.9%
Net Average   +6.9%   +6.4%   +6.1%

Business Revenues Prediction for 2001

Manufacturing

Purchasers forecast that 2001 will be better than 2000. Their expectations are less optimistic than those expressed for 2000 over 1999. The 66 percent of members forecasting better business in 2001 than in 2000 estimate an average nominal (before adjusting for inflation) increase of 9.2 percent in their companies' revenues. This compares to an average nominal decrease of 11.4 percent forecast by the 16 percent who predict worse business in 2000. Including the 18 percent who see no change in 2000, the forecast for overall net nominal growth in business revenues for 2001 over 2000 is 4.4 percent.

Non-Manufacturing

Non-manufacturing purchasers forecast that business for 2001 will be improved over 2000 and by a larger margin than the 2000 increase over 1999. The 71 percent of members forecasting better business in 2001 than in 2000 estimate an average nominal (before adjusting for inflation) increase of 10.3 percent in their organizations' revenues. This compares to an average nominal decrease of 5.6 percent forecast by the 7 percent who predict worse business in 2001. Including the 22 percent who see no change in 2001, the forecasted overall net nominal growth in non-manufacturing business revenue in 2001 over 2000 is 6.9 percent (reported 2000 increase over 1999 was 6.1 percent). Industries expecting the largest percent increase in revenues in 2001 are: Real Estate; Insurance; Communication; Utilities; Construction; and Business Services.

Business: 2001 vs. 2000 Revenues
  Manufacturing Non-Manufacturing
  Predicted
Dec '00
Nominal
% Change
Predicted
Dec '00
Nominal
% Change
Higher 66% +9.2% 71% +10.3%
Same 18% NA 22% NA
Lower 16% -11.4% 7% -5.6%
Net Average   +4.4%   +6.9%


BUSINESS COMPARISON

The First Half of 2001 with Last Half of 2000

Manufacturing

Looking ahead to the next half year, members are less optimistic when comparing their outlook for the first half of 2001 to the last half of 2000. While 40 percent predict it will be better, 25 percent predict it will be worse, and 35 percent expect no change. Compared to the diffusion index of one year ago (72 percent), members are certainly less optimistic about prospects in the manufacturing sector for the first half-year (57.5 percent).

Non-Manufacturing

Looking ahead to the next half year, members are somewhat less optimistic than they were in either May 2000 or December 1999. Comparing their expectations for the first half of 2001 to the last half of 2000, 43 percent of non-manufacturing purchasers expect it will be better, 11 percent anticipate it will be worse, and 46 percent predict no change.

Business: First Half 2001 vs. Last Half 2000
  Manufacturing Non-Manufacturing
  Predicted
Dec '00
Predicted
Dec '00
Better 40% 43%
Same 35% 46%
Worse 25% 11%
Diffusion Index 57.5% 66%

Note: A diffusion index above 50 percent would generally indicate an expectation of the first half of the coming year being better than the second half of the current year.

The Second Half of 2001 with the First Half of 2001

Manufacturing

Purchasing executives are more optimistic about the second half of 2001 compared to the first half of the year. The proportion of members who forecast the second half of 2001 to be better than the first half is 45 percent, while 15 percent expect it to be worse and 40 percent expect no change.

Non-Manufacturing

Non-manufacturing purchasing executives are somewhat more optimistic concerning the second half of 2001 compared to the first half of the year. The proportion of members who forecast the second half of 2001 to be better than the first half is 44 percent, while 7 percent expect it to be worse. An additional 49 percent of purchasers expect no change.

Business: 2nd Half 2001 vs. First Half 2001
  Manufacturing Non-Manufacturing
  Predicted
Dec '00
Predicted
Dec '00
Better 45% 44%
Same 40% 49%
Worse 15% 7%
Diffusion Index 65% 68.5%

Note: A diffusion index above 50 percent would generally indicate an expectation of the second half of the coming year being better than the first half.


60th Semiannual Economic Forecast Continued...