FOR RELEASE: May 1, 1998
Contact: Zenobia Daruwalla
NAPM, Media Relations
602/752-6276 ext. 3015
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 1998.
(Tempe, Arizona) — Economic activity in the manufacturing sector grew at a slower rate in April than in March. The overall economy continued to grow in April for the 84th 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 grew at a slower pace in April than in March. Both Production and New Orders grew, but at a slower pace," said Ore. "Supplier Deliveries continued to indicate slow delivery performance while the Backlog of Orders Index grew for the second month after declining for two months. Manufacturing Employment failed to grow in April. NAPM’s Price Index indicates prices paid by manufacturers are still declining. Exports failed to grow in April while Imports grew at a faster rate than recorded in March. Purchasing executives remain optimistic about the continued strength of the economy. Their greatest concern is still the impact of the Asian economic situation on exports and imports, and there are still concerns with rail deliveries."
The Purchasing Managers' Index declined to 52.9 percent in April from 54.8 percent in March. NAPM's Production Index decreased 4.2 percentage points from 57.6 percent in March to 53.4 percent in April. NAPM's New Orders Index decreased .5 percentage point from 57.3 percent in March to 56.8 percent in April. NAPM’s Backlog of Orders Index registered 52.5 percent indicating larger backlogs when compared to March.
NAPM's Supplier Deliveries Index in April indicates deliveries are slowing at a slightly slower rate. The index was down 1.1 percentage points to 52.3 percent from March’s index of 53.4 percent. The NAPM Employment Index failed to grow with an index of 49.8 percent down from 52.5 percent in March. NAPM's Price Index in April is 41.2 percent, continuing its decline and lower than the 44.4 percent for March, indicating prices paid by manufacturers are decreasing at a faster rate.
NAPM's Inventories Index showed continued inventory liquidation, but at a faster rate than in March. The Inventories Index decreased slightly to 46.6 percent from 46.8 percent in March. Responding to a special monthly question concerning customers' inventories of products purchased from the purchasers' organizations, 13 percent of the purchasing executives felt they were too high (up from nine percent in March). On the other hand, 15 percent felt they were too low (the same as March) and 72 percent thought they were about right (down from 76 percent in March).
NAPM's New Export Orders Index continued to contract in April, though rising 1.7 percentage points to 49.7 percent. Imports of materials by manufacturers increased at a faster rate than in March as NAPM's Imports Index was up 2.9 percentage points to 56.3 percent from 53.4 percent in March.
"The overall picture in April as indicated by growth in production and new orders is one of continued growth in manufacturing activity though at a slower pace," added Ore. "New orders are growing and as a leading indicator, predicts growth in production rates in the coming months. Production is still strong while supplies and deliveries of commodities do not appear to be a problem."
Of the 20 industries in the manufacturing sector, ten reported improved business in April. Industries that reported improvement over March were (listed in order): Petroleum; Industrial & Commercial Equipment & Computers; Fabricated Metals; Furniture; Chemicals; Printing & Publishing; Glass, Stone & Aggregate; Food; Paper; and Rubber & Plastic Products.
"Aluminum, Caustic Soda, Copper, Corrugated Containers, Natural Gas, and Steel were the commodities reported with price increases. Commodities with reports of price decreases include Aluminum, Castings, Copper, Crude Oil, Methyl Ethyl Ketone, Polyethylene Resin (HDPE), Polyethylene Film (HDPE), Polypropylene, Resistors, Resins, Semiconductors, and Zinc. Steel Plate was the only commodity listed in short supply," Ore stated.
APRIL 1998 NAPM BUSINESS SURVEY AT A GLANCE
|Series||April||Direction||Rate of Change|
|Index||Apr vs Mar||Apr vs Mar|
|Backlog of Orders||52.5||Growing||Faster|
|New Export Orders||49.7||Contracting||Slower|
THE ECONOMY AT A GLANCE
|Overall Economy||Growing||Growing Slower|
Purchasing Managers' Index (PMI)
The Purchasing Managers' Index (PMI) indicated growth in April with an index of 52.9 percent, down from 54.8 percent in March. This indicates that the manufacturing economy grew at a slower pace in April than it did in March. April is the 21st consecutive month that the PMI has indicated manufacturing growth. 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 43.6 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 January through April (53.4 percent), corresponds to a 3.4 percent increase in real gross domestic product (GDP). However, if the PMI for April (52.9 percent) turned out to be the annual average for 1998, this would correspond to a 3.2 percent increase in real GDP."
|Month||Apr ’98||Mar ‘98||Feb ’98||Jan ’98||Dec ’97|
|Month||Nov ’97||Oct ’97||Sep ’97||Aug ’97||Jul ’97|
|Month||Jun ’97||May ’97||Apr ’97||Mar ’97||Feb ’97|
NAPM's Production Index grew at a slower rate in April than in March. April is the 25th consecutive month of growth according to the index. The Production Index in April is 53.4 percent, a 4.2 percentage point decrease when compared to the March index of 57.6 percent.
An index above 50.1 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; Furniture; Industrial & Commercial Equipment & Computers; Instruments & Photographic Equipment; Fabricated Metals; Printing & Publishing; Chemicals; Rubber & Plastic Products; and Electronic Components & Equipment.
NAPM's New Orders Index declined to 56.8 percent in April from 57.3 percent in March. The New Orders Index decreased .5 percentage point while indicating growth for the 25th consecutive month. A New Orders Index above 50.6 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 1987 dollars). Fourteen industries reported higher rates of increase in new orders. They were (listed in order): Petroleum; Apparel; Industrial & Commercial Equipment & Computers; Fabricated Metals; Glass, Stone & Aggregate; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Chemicals; Furniture; Paper; Wood & Wood Products; Food; Printing & Publishing; Primary Metals; and Transportation & Equipment.
Backlog of Orders
NAPM's Backlog of Orders Index (not seasonally adjusted) moved upward in April to 52.5 percent from 51.5 percent in March, indicating a larger backlog of orders for the month of April when compared to March. The eight industries that reported greater rates of increase in backlog of orders in April over March were: Wood & Wood Products; Paper; Petroleum; Industrial & Commercial Equipment & Computers; Food; Rubber & Plastic Products; Fabricated Metals; and Primary Metals.
|Backlog of Orders||%Reporting||%Greater||%Same||%Less||Net||Index|
NAPM's Supplier Deliveries Index in April indicates delivery performance continued to slow with an index reading of 52.3 percent, a 1.1 percentage point decrease from March’s index of 53.4 percent. Deliveries have been reported slower in the last 15 consecutive months. The industries reporting slower supplier deliveries in April were: Instruments & Photographic Equipment; Petroleum; Furniture; Transportation & Equipment; Rubber & Plastic Products; Paper; Food; and Fabricated Metals.
NOTE: A list of commodities in short supply is available at the end of this report.
Manufacturers' inventory activity in April indicated a slightly faster rate of reduction than reported in March. The NAPM Inventories Index for April decreased to 46.6 percent from 46.8 percent in March. This continues a long-term trend of inventory reduction by manufacturers. An Inventories Index over 42.1 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis' (BEA) figures on overall manufacturing inventories (constant 1987 dollars). The industries reporting higher inventories in April over March were: Petroleum; Printing & Publishing; and Electronic Components & Equipment.
Manufacturing employment declined in April for the first time in 14 months. The April index is 2.7 percentage points less than March, decreasing from 52.5 percent to 49.8 percent. An Employment Index above 46.9 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment. The six industries that reported growth in employment in April were: Textiles; Food; Chemicals; Printing & Publishing; Industrial & Commercial Equipment & Computers; and Fabricated Metals.
NAPM's Price Index declined in April to 41.2 percent from 44.4 percent in March. This index indicates lower prices for the fourth straight month after six consecutive months of paying higher prices. In April, seven percent of purchasing executives reported paying higher prices, 26 percent reported paying lower prices, while 67 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 only industry reporting paying higher prices in April was Rubber & Plastic Products.
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 failed to indicate growth (an index exceeding 50 percent) marking the fourth consecutive month that the index has contracted. The index has been above 50 percent in 23 of the last 27 months. The New Export Orders Index moved slightly upward to 49.7 percent from 48 percent in March. The industries reporting growth in new export orders in April were: Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Textiles; Chemicals; Transportation & Equipment; and Industrial & Commercial Equipment & Computers.
|New Export Orders||%Exporting||%Better||%Same||%Worse||Net||Index|
Imports of materials by manufacturers grew at a faster rate in April than in March with an index of 56.3 percent. NAPM's Imports Index increased 2.9 percentage points from 53.4 percent in March. The index has indicated growth in the purchase of imports for 21 of the last 22 months. The nine industries reporting growth in import activity for April were:Leather; Instruments & Photographic Equipment; Furniture; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Rubber & Plastic Products; Chemicals; Food; Electronic Components & Equipment; and Industrial & Commercial Equipment & Computers.
Average commitment leadtime for Capital Expenditures rose to 122 days in April. Average leadtime for Production Materials is 48 days, up one day from March. Average leadtime for Maintenance, Repair, and Operating (MRO) supplies increased six days to 29 days.
|Capital Expenditures||Hand to Mouth||30 Days||60 Days||90 Days||6 Mos.||1 Year||Avg. Days|
In Short Supply
The only commodity mentioned in short supply was Steel Plate.
Up in Price
Aluminum (also shown down in price); Caustic Soda - 11th month (used heavily in papermaking, petroleum refining, and soap making); Copper (also shown down in price); Corrugated Containers - 10th month; Natural Gas - 2nd month; and Steel - 2nd month.
Down in Price
Aluminum - 6th month (also shown up in price); Castings; Copper - 10th month (also shown up in price); Crude Oil; Methyl Ethyl Ketone; Polyethylene (HDPE) Resin - 3rd month; Polyethylene (HDPE) Film; Polypropylene - 2nd month; Resistors; Resins; Semiconductors; and Zinc - 7th 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 43.6 percent, over a period of time, indicates that the overall economy, or Gross Domestic Product (GDP), is generally expanding, below 43.6 percent, that it is generally declining. The distance from 50 percent or 43.6 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 has more than 44,000 members in the United States and Puerto Rico. The report has been issued by the association since 1931, except during World War II.
The full text version of the Manufacturing NAPM Report On Business® is posted on NAPM’s Web site at http://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 1998 data will be released at 10:00 a.m. (EST) on June 1, 1998.