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November 2000 Non-Manufacturing NAPM Report On Business®

FOR RELEASE: December 5, 2000

Contact: Kristen Kioa
  NAPM, Media Relations
  Tempe, Arizona
  800/888-6276, Ext. 3015
NON-MANUFACTURING BUSINESS ACTIVITY GROWS AT A SLIGHTLY FASTER RATE IN NOVEMBER SAY PURCHASING EXECUTIVES IN LATEST NON-MANUFACTURING NAPM REPORT ON BUSINESS®

DO NOT CONFUSE THIS NATIONAL NON-MANUFACTURING REPORT with the various regional purchasing reports released across the country or the Manufacturing NAPM Report On Business®. The national non-manufacturing 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 2000.

Employment Increases at a Faster Rate
New Orders, Imports, and Prices Increase at Slower Rates

(Tempe, Arizona) — Business in the non-manufacturing sector grew more slowly in November 2000 say the nation's purchasing executives in the latest Non-Manufacturing NAPM Report On Business®.

The report was issued today by Ralph G. Kauffman, Ph.D., C.P.M., chair of the National Association of Purchasing Management's Non-Manufacturing Business Survey Committee and coordinator of the purchasing and supply management program, University of Houston-Downtown. "In November, NAPM's Non-Manufacturing Business Activity Index continued its long-term growth trend at a slightly faster rate of growth than in October," Kauffman said. "Although Business Activity and Employment increased at faster rates, New Orders, Imports, and Prices increased at slower rates in November than in October. Order Backlogs and Inventories declined in November, and New Export Orders increased at the same rate as in October. Supplier Deliveries continued its trend of slowness in November at a slightly decreased rate of slowing. The Non-Manufacturing Inventory Sentiment Index indicated that purchasing executives felt a lesser degree of discomfort with the level of inventories in November than they did in October," Kauffman said.

"NAPM's Non-Manufacturing Business Activity Index registered 58.5 percent in November, one-half percentage point higher than in October, indicating slightly faster growth in non-manufacturing economic activity. Comments from purchasing executives continued to be mostly positive on business activity in November. Increased business activity in November was reported by 31 percent of purchasers, a decrease of 1 percentage point from the 32 percent reporting more activity in October. Of the industry groups reporting in the November NAPM non-manufacturing survey, 12 indicated increased activity, 3 indicated decreased activity, and 2 reported no change in activity compared to October. In October, 13 industry groups reported increased activity and 3 reported decreased activity level," said Kauffman.

This month our members reported decreased inventories, after five consecutive months of increases, and also indicated a slower rate of increase in the prices they pay for their purchases. Members indicate they are reducing inventories to get better control and as a result of slower increases in business. The Prices Index decreased in November from 61 percent to 57 percent, breaking out of the 59 percent to 61.5 percent range it has occupied for the past four months. The percentage of members reporting higher prices decreased to 21 percent in November from 26 percent in October, the proportion indicating no change increased 2 points to 72 percent, and the number who noted lower prices increased 3 points to 7 percent

"Overall in November, non-manufacturing industries continued their long-term growth trend at an increased rate of growth compared to October. This month the Business Activity Index increased, the New Orders increased but at a slower rate, and the Backlog of Orders Index indicated a decrease in backlogs from October levels. Non-manufacturing inventories decreased compared to October. Employment rose at a somewhat faster rate of increase, and Prices increased at a slower rate in November," Kauffman commented.

NAPM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
Series November
Indexes
October
Indexes
November
vs. October
Index
Change
Direction
and Rate of
Change
Business Activity 58.5 58.0 +0.5 Increasing Faster
New Orders 56.5 57.5 -1.0 Increasing Slower
Backlog of Orders 49.5 53.5 -4.0 Decreasing from Increasing
New Export Orders 55.0 55.0 0 Increasing at Same Rate
Inventory Change 49.5 55.0 -5.5 Decreasing from Increasing
Inventory Sentiment 66.0 67.5 -1.5 Decreased Feeling of "too high"
Imports 53.5 57.5 -4.0 Increasing Slower
Prices 57.0 61.0 -4.0 Increasing Slower
Employment 54.5 53.5 +1.0 Increasing Faster
Supplier Deliveries 54.0 54.5 -0.5 Slowing at a Slower Rate

COMPARISON OF NAPM NON-MANUFACTURING AND NAPM MANUFACTURING SURVEYS*

Business Activity increased in non-manufacturing industries and production decreased in manufacturing industries in November. New orders increased for the non-manufacturing sector but decreased for manufacturing. Backlog of orders decreased for both the non-manufacturing and manufacturing sectors, but decreased faster in manufacturing. Prices increased in November for both areas but rose slightly faster for non-manufacturing. Employment in November rose for non-manufacturing but dropped in the manufacturing sector. Inventories decreased for both manufacturing and non-manufacturing with a faster rate of decrease in manufacturing. New export orders moved up in non-manufacturing but were reduced in manufacturing. Supplier delivery performance in November was reported to be slower in non-manufacturing but faster in manufacturing. Use of Imports was up in both manufacturing and non-manufacturing, but increased at a slightly faster rate in non-manufacturing.

Non-Manufacturing
Survey Questions
Indexes Manufacturing
Survey Questions
Indexes
Business Activity 58.5 Production 49.6
New Orders 56.5 New Orders 48.4
Backlog of Orders 49.5 Backlog of Orders 42.0
New Export Orders 55.0 New Export Orders 48.7
Inventory Change 49.5 Inventories 42.2
Inventory Sentiment 66.0    
Imports 53.5 Imports 53.2
Prices 57.0 Prices 56.6
Employment 54.5 Employment 46.0
Supplier Deliveries 54.0 Supplier Deliveries 49.2

*Manufacturing NAPM Report On Business® data is seasonally adjusted except for Backlog of Orders. Non-Manufacturing NAPM Report On Business® data is not seasonally adjusted.

Non-Manufacturing Business Activity

NAPM's Non-Manufacturing Business Activity Index in November increased to 58.5 percent, indicating increased business activity at a slightly faster rate than in October (58 percent). Purchasing executives' comments in November continued to be very positive. The percent of members reporting increased activity dropped to 31 percent in November from 32 percent in October. Members reporting decreased activity decreased to14 percent in November from 16 percent in October. Those reporting no change in activity in November totaled 55 percent, an increase of 3 percentage points from October's 52 percent.

The industries reporting the highest rates of growth of business activity in November were: Legal Services; Entertainment; Utilities; Construction; and Finance and Banking.

Business
Activity
%
Higher
%
Same
%
Lower
Index
November 2000 31 55 14 58.5
October 2000 32 52 16 58.0
September 2000 37 50 13 62.0
August 2000 32 56 12 60.0

Non-Manufacturing New Orders

NAPM's Non-Manufacturing New Orders Index decreased to 56.5 percent in November from 57.5 percent in October. This was the lowest New Orders Index since January 2000 when it was also 56.5 percent. Comments from members included: "Height of fall catalog season," "Additional patient load," "New projects," and "Increased demand for services."

The industries reporting the highest rates of growth of new orders in November were: Legal Services; Transportation; Utilities; Construction; Business Services; and Entertainment.

New
Orders
%
Higher
%
Same
%
Lower
Index
November 2000 29 55 16 56.5
October 2000 30 55 15 57.5
September 2000 35 52 13 61.0
August 2000 33 53 14 59.5

Non-Manufacturing Backlog of Orders

NAPM's Non-Manufacturing Backlog of Orders Index registered 49.5 percent in November. This was the first reported decrease in order backlogs in ten months and the lowest Index level since January 2000 (48.5 percent). The November index is a decrease of 4 percentage points from October's 53.5 percent. Purchasing executives' comments on backlogs of orders included: "Requirements for printed items have tapered off," "More efficient filling of orders," "Improved fill rates," and "Deliveries of ordered goods has slowed down." Of the total respondents in November, 27 percent indicated they do not measure backlog of orders.

The industries reporting the highest rates of growth of backlog of orders in November were: Legal Services; Transportation; Mining; Construction; and Retail Trade. The industries reporting the highest rates of decline of backlog of orders in November were: Agriculture; Insurance; Entertainment; Health Services; Business Services; and *Other Services.

Backlog
of Orders
%
Higher
%
Same
%
Lower
Index
November 2000 16 67 17 49.5
October 2000 21 65 14 53.5
September 2000 22 69 9 56.5
August 2000 19 66 15 52.0

Non-Manufacturing Supplier Deliveries

The delivery performance of suppliers to non-manufacturing organizations slowed at a slightly slower rate in November. NAPM's Non-Manufacturing Supplier Deliveries Index for November was 54 percent compared to 54.5 percent in October. Comments from purchasing executives included: "Railway delivery is slow," "Shorter lead times," "High-tech manufacturing is becoming overburdened with new orders," and "Weather, increased demand (caused slower deliveries)."

The industries that reported the highest rates of slowness of supplier deliveries in November were: Legal Services; Mining; Health Services; Entertainment; Construction; and Utilities.

Supplier
Deliveries
%
Higher
%
Same
%
Lower
Index
November 2000 4 84 12 54.0
October 2000 2 87 11 54.5
September 2000 6 82 12 53.0
August 2000 3 84 13 55.0

Non-Manufacturing New Export Orders

Orders and requests for services and other non-manufacturing activities to be provided outside of the United States by domestically-based personnel increased in November for the ninth consecutive month. The rate of increase in November was the same as in October as NAPM's Non-Manufacturing New Export Orders Index remained at 55 percent for the second month. Of the total respondents in November, 75 percent indicated they either do not perform, or do not separately measure, orders for work outside the United States.

The industries reporting increases in new export orders in November were: Real Estate; Retail Trade; and Construction.

New Export
Orders
%
Higher
%
Same
%
Lower
Index
November 2000 25 60 15 55.0
October 2000 23 64 13 55.0
September 2000 16 71 13 51.5
August 2000 18 76 6 56.0

Non-Manufacturing Imports

Use of imported materials by non-manufacturing industries continued to grow, but at a slower rate of growth in November. NAPM's Non-Manufacturing Imports Index for November was 53.5 percent, a drop of 4 percentage points from the 57.5 percent reported in October. In November, 70 percent of respondents reported that they do not use or do not track the use of imported materials.

The industries reporting increased use of imports in November were: Transportation; Entertainment; Wholesale Trade; Business Services; and Retail Trade.

Imports %
Higher
%
Same
%
Lower
Index
November 2000 17 73 10 53.5
October 2000 18 79 3 57.5
September 2000 6 86 8 49.0
August 2000 14 81 5 54.5

Non-Manufacturing Inventory Change

Material inventories maintained by non-manufacturing organizations decreased in November for only the second time in nine months. NAPM's Non-Manufacturing Inventories Index registered 49.5 percent in November, a decrease of 5.5 percentage points from the 55 percent reported in October. The November Index was the lowest index of inventory change since May 2000 when the Index was also 49.5 percent. Of the total respondents in November, 26 percent indicated they do not have inventories. Comments from member purchasers included: "Slower construction rate, transfers of excess inventory," "Better internal control," "Throughput/turns are increasing," and "Reduction program."

The industries reporting the highest rates of inventory increase in November were: Legal Services; Agriculture; Entertainment; Mining; and Transportation. The industries reporting the highest rates of inventory decrease in November were: Communication; Retail Trade; Health Services; Insurance; and Finance and Banking.

Inventory
Change
%
Higher
%
Same
%
Lower
Index
November 2000 21 57 22 49.5
October 2000 25 60 15 55.0
September 2000 24 59 17 53.5
August 2000 19 64 17 51.0

Non-Manufacturing Inventory Sentiment

The NAPM Non-Manufacturing Inventory Sentiment Index in November registered 66 percent compared to 67.5 percent for October. This drop in the index level indicates that non-manufacturing purchasing executives felt a lesser degree of discomfort with current levels of inventory in November than they did during October, and coincides with the second reported decrease in inventories in nine months. In November, 37 percent of members felt their inventories were too high (38 percent in October). Also in November, 5 percent indicated their inventories were too low (3 percent in October), and 58 percent said that their inventories were about right (59 percent in October).

The industries that reported the highest rates of feeling that their inventories were "too high" in November were: Legal Services; Transportation; Communication; Agriculture; and Wholesale Trade.

Inventory
Sentiment
%
Higher
%
Same
%
Lower
Index
November 2000 37 58 5 66.0
October 2000 38 59 3 67.5
September 2000 40 50 10 65.0
August 2000 28 67 5 61.5

Non-Manufacturing Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in November for the 21st consecutive month and at a lower rate of increase than in October. NAPM's Non-Manufacturing Price Index for November declined to 57 percent from 61 percent in October, and reached its lowest level since December 1999 when it was 56 percent.

The industries that reported the highest rate of increase in prices paid in November were: Legal Services; Construction; Mining; Communication; and Utilities.

Prices %
Higher
%
Same
%
Lower
Index
November 2000 21 72 7 57.0
October 2000 26 70 4 61.0
September 2000 27 67 6 60.5
August 2000 23 72 5 59.0

Non-Manufacturing Employment

Employment in the non-manufacturing sector grew at a faster rate in November than in October. NAPM's Non-Manufacturing Employment Index for November was 54.5 percent compared to 53.5 percent in October. Comments from purchasers included: "Growth to support international office," "Growing business," "Expansion," and "Filling vacancies."

The industries reporting the highest rates of growth of employment in November were: Legal Services; Insurance; Construction; Mining; Business Services; Transportation; and Entertainment.

Employment %
Higher
%
Same
%
Lower
Index
November 2000 19 71 10 54.5
October 2000 20 67 13 53.5
September 2000 20 64 16 52.0
August 2000 22 64 14 54.0

*Other Services include:
Hotels, Rooming Houses, Camps, and Other Lodging Places; Personal Services; Automotive Repair, Services, and Parking; Miscellaneous Repair Services; Educational Services; Social Services; Museums, Art Galleries, and Botanical and Zoological Gardens; Membership Organizations; Engineering, Accounting, Research, Management, and Related Services; and Miscellaneous Services.

Commodities Reported in Short Supply

Copper; Fiber Optic Cable — 2nd month; Fuel; Laptops — 9th month; Natural Gas; Temporary Help — 3rd month.

Commodities Reported Up in Price

Caustic Soda — 2nd month; Chemicals — 2nd month; Copper Pipe and Fittings; Diesel Fuel — 6th month; Freight Services — 4th month; Fuel — 10th month; Gasoline — 3rd month (some reports of price decreases); Labor — 4th month; Paper — 20th month; Plastics — 3rd month.

Commodities Reported Down in Price

Computers (PCs) — 9th month; Steel.

Data and Method of Presentation

The Non-Manufacturing NAPM Report on Business® is based on data compiled from monthly replies to questions asked of more than 370 purchasing executives in over 62 different industries representing nine divisions from the Standard Industrial Classification (SIC) categories. Membership of the Business Survey Committee is diversified by SIC category and is based on each industry's contribution to Gross Domestic Product (GDP).

Survey responses reflect the change, if any, in the current month compared to the previous month. For each of the indicators measured (Business Activity, New Orders, Backlog of Orders, New Export Orders, Inventory Change, Inventory Sentiment, Imports, Prices, Employment, and Supplier Deliveries), this report shows the percentage reporting each response, the net difference between the number of responses in the positive economic direction (higher and slower for Supplier Deliveries) and the negative economic direction (lower and faster for Supplier Deliveries). Responses represent raw data and are never changed. The resulting single index number is not seasonally adjusted.

A weighted composite index similar to the Purchasing Managers Index (PMI) that is so popular in the Manufacturing NAPM Report on Business® is not available. Several years of data will need to be developed before that type of non-manufacturing indicator can be developed. Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change and the scope of change. An index reading above 50 percent indicates that the non-manufacturing economy in that index is generally expanding; below 50 percent, that it is generally declining. Supplier Deliveries is an exception. A Supplier Deliveries index above 50 percent indicates slower deliveries and below 50 percent indicates faster deliveries.

The Non-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 181 affiliates with more than 45,000 members in the United States.

The full text version of the Non-Manufacturing NAPM Report on Business® is posted on NAPM's Web site at www.ism.ws on the third business day of every month after 10:10 a.m. (ET).

The next Non-Manufacturing NAPM Report on Business® featuring the December 2000 data will be released at 10:00 a.m. (ET) on January 4, 2001.



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