--- To enhance the value and performance of procurement and SCM practitioners and their organizations worldwide ---



October 1999 Non-Manufacturing Report On Business®

FOR RELEASE: November 3, 1999

Contact: Zenobia Daruwalla
  NAPM Media Relations
  480/752-6276 ext. 3015
NON-MANUFACTURING BUSINESS ACTIVITY CONTINUES TO GROW IN OCTOBER 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 October 1999.

Business Activity Index Moderates to 60.0%
New Orders, Export Orders, and Prices Continue to Increase

(Tempe, Arizona) — Business in the non-manufacturing sector grew in October 1999 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 October, NAPM's Non-Manufacturing Business Activity Index continued its long-term growth trend but at a slightly slower rate of increase than in September," Kauffman said. "New Orders, Export Orders, Imports, and Backlog of Orders also increased at slower rates in October, while Supplier Deliveries were slower than in September and Employment increased slightly. Inventories decreased for the first time in three months. Prices paid by non-manufacturing organizations for materials and services increased at a slower rate than in September, and the Non-Manufacturing Inventory Sentiment Index indicated that purchasing executives are feeling a much lower degree of discomfort with the current level of inventories in October than they did in September," Kauffman said.

"NAPM's Non-Manufacturing Business Activity Index registered 60.0 percent in October, compared to 61.0 percent in September, reflecting a continued increase in non-manufacturing economic activity. Comments from purchasing executives continue to be positive on business activity in October. Increased business activity in October was reported by 32 percent of purchasers, a decrease of one percentage point from the 33 percent reporting more activity in September. Of the industry groups reporting in the October NAPM non-manufacturing survey, sixteen indicated increased activity, none indicated decreased activity, and one reported no change in activity level. In September, fourteen industry groups reported increased activity, one indicated decreased activity, and two advised no change," said Kauffman.

In October there were fewer reports of shortages of qualified labor than in September from the members of the NAPM Non-Manufacturing Business Survey Committee. Also there were more reports of actual or impending labor force reductions. NAPM's Non-Manufacturing Employment Index indicated a slight increase in employment in October, moving up one point to 51.0 percent from its indication of no change in September. Prices paid by members' firms for purchased materials and services continue to be a concern but there are indications that the concern may be moderating. In October, the NAPM Non-Manufacturing Price Index dropped to 57.0 percent from a record-high 62.0 percent in September. Members reporting higher prices in October numbered 22.0 percent, a drop of six percentage points from the record 28.0 percent reported in September.

"Overall in October, non-manufacturing industries continued their long-term growth trend. However, new orders and order backlogs grew more slowly this month, indicating a slight moderation in the strength of business growth. Labor problems appear to continue to subside in October and there are indications that purchase prices are increasing more slowly than in recent months," Kauffman commented.

NAPM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
Series October
Indexes
September
Indexes
October vs.
September
Index
Change
Direction
and Rate of
Change
Business Activity 60.0 61.0 -1.0 Increasing Slower
New Orders 60.5 61.0 -0.5 Increasing Slower
Backlog of Orders 52.0 52.5 -0.5 Increasing Slower
New Export Orders 54.0 62.5 -8.5 Increasing Slower
Inventory Change 47.5 52.0 -4.5 Decreasing from Increasing
Inventory Sentiment 58.0 61.5 -3.5 Decreased Feeling of "too high"
Imports 54.5 58.5 -4.0 Increasing Slower
Prices 57.0 62.0 -5.0 Increasing Slower
Employment 51.0 50.0 +1.0 Increasing from Unchanged
Supplier Deliveries 56.0 54.0 +2.0 Slowing at Faster Rate

COMPARISON OF NAPM NON-MANUFACTURING AND NAPM MANUFACTURING SURVEYS*

Business Activity in non-manufacturing industries and production in manufacturing industries both grew in October with a faster rate of growth in non-manufacturing business activity. New orders also increased for both the non-manufacturing and manufacturing sectors with a greater rate of increase for non-manufacturing. Backlog of orders increased for both sectors in October but at a faster rate for manufacturing. Prices increased in October for both areas but increased faster for manufacturing. Employment in October increased for manufacturing and non-manufacturing but increased more rapidly in manufacturing. Inventories decreased in non-manufacturing but increased in manufacturing. New export orders increased for both sectors with non-manufacturing experiencing a higher rate of increase. Supplier delivery performance in October was reported to be slow by both sectors with manufacturing reporting the greater rate of slowness. Use of Imports was up in both sectors in October with a higher rate of increase in non-manufacturing.

Non-Manufacturing
Survey Questions
Indexes Manufacturing
Survey Questions
Indexes
Business Activity 60.0 Production 58.3
New Orders 60.5 New Orders 59.5
Backlog of Orders 52.0 Backlog of Orders 54.0
New Export Orders 54.0 New Export Orders 52.4
Inventory Change 47.5 Inventories 51.1
Inventory Sentiment 58.0    
Imports 54.5 Imports 54.3
Prices 57.0 Prices 69.4
Employment 51.0 Employment 52.8
Supplier Deliveries 56.0 Supplier Deliveries 56.6

* 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 October decreased to 60.0 percent from 61.0 percent in September, indicating increased business activity but at a slightly slower rate of increase. Respondent comments in October continued to be positive, supporting the index's indication of increased business activity.

Purchasing executives reporting better business in October numbered 32 percent, a decrease from the 33 percent reporting more activity in September. Members who indicated lower business activity in October numbered 12 percent, a slight change from 11 percent in September. The industries reporting the highest rates of growth of business activity in October were: Insurance; Agriculture; Communication; Transportation; Wholesale Trade; and Business Services.

Business
Activity
% Higher % Same % Lower Index
October 1999 32 56 12 60.0
September 1999 33 56 11 61.0
August 1999 31 57 12 59.5
July 1999 31 57 12 59.5

Non-Manufacturing New Orders

NAPM's Non-Manufacturing New Orders Index declined slightly to 60.5 percent in October from 61.0 percent in September, indicating a slower rate of increase for new orders to non-manufacturers. October's New Orders Index indicates continued high levels of activity with a moderating rate of growth. Comments from respondents included: "New products roll out," "Slight increase," and "New market penetration."

The industries reporting the highest rates of growth of new orders in October were: Agriculture; Wholesale Trade; Insurance; Business Services; Communication; and Health Services.

New
Orders
% Higher % Same % Lower Index
October 1999 33 55 12 60.5
September 1999 31 60 9 61.0
August 1999 32 55 13 59.5
July 1999 28 54 18 55.0

Non-Manufacturing Backlog of Orders

NAPM's Non-Manufacturing Backlog of Orders Index was 52.0 percent in October, indicating increased order backlogs compared to September. The October Index declined slightly from September's 52.5 percent, indicating a slower rate of increase of order backlogs. Purchasing executives' comments on the backlog of orders report included: "Supply chain constraints," "Higher demand, same resources," and "Logistics issues with come key suppliers." Of the total respondents in October, 29.6 percent indicated they do not measure backlog of orders.

The industries reporting the highest rates of growth of backlog of orders in October were: Wholesale Trade; Real Estate; Business Services; *Other Services; Entertainment; and Health Services.

Backlog
of Orders
% Higher % Same % Lower Index
October 1999 19 66 15 52.0
September 1999 16 73 11 52.5
August 1999 18 67 15 51.5
July 1999 16 68 16 50.0

Non-Manufacturing Supplier Deliveries

The delivery performance of suppliers to non-manufacturing organizations was at a higher rate of slowness in October than in September. NAPM's Non-Manufacturing Supplier Deliveries Index for October was 56.0 percent compared to 54.0 percent in September. The October index was the highest since the UPS strike-induced 71.5 percent in August 1997. Comments from purchasing executives included: "Rail delivery is slow" (there were several comments on slow rail service), "Increased demand for high tech products," and "Suppliers operating at capacity with large backlogs."

The industries that reported the slowest rates of supplier deliveries in October were: Legal Services; Communication; Business Services; Wholesale Trade; Agriculture; and Mining.

Supplier
Deliveries
% Higher % Same % Lower Index
October 1999 3 82 15 56.0
September 1999 2 88 10 54.0
August 1999 4 85 11 53.5
July 1999 4 87 9 52.5

Non-Manufacturing New Export Orders

Orders and requests for services and other non-manufacturing activities to be provided outside of the U.S. by U.S.-based personnel increased for the eighth consecutive month in October, but at a slower rate of increase than in September. NAPM's Non-Manufacturing New Export Orders Index was 54.0 percent in October compared to 62.5 percent in September. The October New Export Orders Index was the lowest since the 53.5 percent reported in June 1999. Of the total respondents in October, 75.1 percent indicated they either do not perform, or do not separately measure, orders for work outside the U.S.

The only industries reporting higher rates of growth of new export orders in October were: Legal Services; Business Services; Communication; Finance and Banking; and Retail Trade.

New Export
Orders
% Higher % Same % Lower Index
October 1999 14 80 6 54.0
September 1999 29 67 4 62.5
August 1999 24 68 8 58.0
July 1999 26 63 11 57.5

Non-Manufacturing Imports

Use of imported materials by non-manufacturing industries increased in October for the ninth consecutive month but increased more slowly than in September. NAPM's Non-Manufacturing Imports Index for October was 54.5 percent compared to 58.5 percent in September. In October, 67.7 percent of respondents reported that they do not use or do not track use of imported materials.

The only industries reporting higher rates of growth in use of imports in October were: Wholesale Trade; Retail Trade; and Agriculture.

Imports % Higher % Same % Lower Index
October 1999 17 75 8 54.5
September 1999 21 75 4 58.5
August 1999 11 83 6 52.5
July 1999 19 77 4 57.5

Non-Manufacturing Inventory Change

Material inventories maintained by non-manufacturing organizations decreased in October for the first time in three months. NAPM's Non-Manufacturing Inventories Index registered 47.5 percent in October, compared to 52.0 in September. The Inventory Change Index for October was the lowest since March 1999 (also 47.5 percent). Of the total respondents in October, 22.0 percent indicated they do not have inventories. Comments from member purchasers included: "We are expected to lower inventory by $20 million by January 2000," "Activity has decreased along with material needed," "Company initiative to lower inventory," and "Putting more programs in place for JIT."

The industries reporting the highest rates of decrease of inventories in October were: Legal Services; Utilities; Mining; Agriculture; and Construction.

Inventory
Change
% Higher % Same % Lower Index
October 1999 20 55 25 47.5
September 1999 20 64 16 52.0
August 1999 24 56 20 52.0
July 1999 19 61 20 49.5

Non-Manufacturing Inventory Sentiment

The NAPM Non-Manufacturing Inventory Sentiment Index in October registered 58.0 percent compared to 61.5 percent for September. This reduced index level indicates that non-manufacturing purchasing executives felt a lower degree of discomfort with current levels of inventory in October than they did during September. The October index was the lowest reported since July 1997 (56.5 percent). In October, 28 percent of members felt their inventories were too high (29 percent in September). Also in October, 12 percent indicated their inventories were too low (6 percent in September), and 60 percent said that their inventories were about right (65 percent in September).

The industries that reported the highest rates of feeling that their inventories were "too high" in October were: Mining; Business Services; Construction; Communication; Health Services; and *Other Services.

Inventory
Sentiment
% Higher % Same % Lower Index
October 1999 28 60 12 58.0
September 1999 29 65 6 61.5
August 1999 38 50 12 63.0
July 1999 33 56 11 61.0

Non-Manufacturing Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in October for the eighth consecutive month but at a lower rate of increase than in September. NAPM's Non-Manufacturing Price Index for October was 57.0 percent, compared to 62.0 percent in September. This may be an indication that the strength of price increases over the past eight months is moderating.

The industries that reported the highest rates of increase in prices paid in October were: Mining; Entertainment; Transportation; Wholesale Trade; Communication; and Finance and Banking.

Prices % Higher % Same % Lower Index
October 1999 22 70 8 57.0
September 1999 28 68 4 62.0
August 1999 24 71 5 59.5
July 1999 22 71 7 57.5

Non-Manufacturing Employment

Employment in the non-manufacturing sector increased slightly in October, moving from an indication of no change in September. September was the first month not indicating increased non-manufacturing employment since February 1999. NAPM's Non-Manufacturing Employment Index for October was 51.0 percent compared to 50.0 percent for September. Comments from purchasers included: "Reducing through attrition, "Rapid growth due to market segment expansion," and "Cutting some operations back."

The industries reporting the highest rates of growth of employment in October were: Legal Services; Wholesale Trade; *Other Services; Insurance; Communication; and Real Estate.

Employment % Higher % Same % Lower Index
October 1999 16 70 14 51.0
September 1999 14 72 14 50.0
August 1999 15 74 11 52.0
July 1999 21 71 8 56.5

*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

Gypsum Board (drywall) — 8th month; Computer memory.

Commodities Reported Up in Price

Aluminum; Beef — 2nd month; Caustic Soda; Computer memory; Construction; Copy Paper; Corrugated Containers — 8th month; Envelopes — 2nd month; Fuel — 8th month; Gasoline — 8th month; Gypsum Board (drywall) — 6th month; Milk; Oil — 2nd month; Paper — 7th month; Paper Products — 2nd month; Polybags — 2nd month; Polyethylene (gas pipe, resin, products) — 2nd month; PVC Resin; Soybean Meal; Stainless Steel Products — 2nd month; Steel (beams, pipe, plate).

Commodities Reported Down in Price

Cheese; Computers — 18th month; Corn; PCs; Plywood; Soybean Oil; Telecommunications Services.

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 182 affiliates with more than 45,000 members in the United States and Puerto Rico.

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 November 1999 data will be released at 10:00 a.m. (ET) on December 3, 1999.



Back to Top





Rate and Review this item

Rate this item:



Log in to rate or review this item.