FOR RELEASE: February 1, 2000
|NAPM Media Relations|
|480/752-6276 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 January 2000.
(Tempe, Arizona) — Economic activity in the manufacturing sector grew for the twelfth consecutive month in January. The overall economy continued to grow in January for the 105th 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 of purchasing, Chesapeake Display and Packaging Company. "The manufacturing sector continued to grow in January though at a slightly slower rate than it grew in December. Both production and new orders grew during the month while the Price Index continues to indicate manufacturers are paying higher prices for their purchases, and the NAPM Employment Index continues in a growth mode."
NAPM's Backlog of Orders Index rose in January, indicating that the rate of growth in order backlogs gained momentum, and NAPM's Supplier Deliveries Index once again signals slowing deliveries, though at a slower rate. Manufacturing Employment grew during January as the index rose above the breakeven point (an index of 50) for the ninth consecutive month. NAPM's Price Index continued to strengthen as 17 of 20 industries indicated paying higher prices on average during January. New Export Orders and Imports continue to grow, though at a slower rate than in December. Comments from purchasing managers this month indicate that business is strong in many sectors, and they express optimism with regard to the first half of the year while inventory growth was mentioned as the result of Y2K inventory buildup.
NAPM's Purchasing Managers' Index was slightly lower at 56.3 percent in January, down from 56.8 percent in December. NAPM's Production Index decreased 3.1 percentage points from 59.0 percent in December to 55.9 percent in January. NAPM's New Orders Index rose 0.8 percentage point from 59.6 percent in December to 60.4 percent in January. NAPM's Backlog of Orders Index registered 52 percent, up 2 percentage points from the 50 percent recorded in December. NAPM's Supplier Deliveries Index is 55.2 percent in January down from 56.7 percent in December. The NAPM Employment Index is at 52.7 percent for January, a decrease of 1.9 percentage points when compared to the 54.6 percent reported in December. NAPM's Price Index in January is 72.6 percent, an increase of 4.3 percentage points from December.
NAPM's Inventories Index rose to 53.4 percent, a change of direction indicating inventory growth when compared to December. Responding to a special monthly question concerning customers' inventories of products purchased from the purchasers' organizations, 10 percent of the purchasing executives felt they were too high (down from 11 percent in December). On the other hand, 17 percent felt they were too low (up from 14 percent in December) and 73 percent thought they were about right (down from 75 percent in December).
NAPM's New Export Orders Index continued positive for the twelfth consecutive month while decreasing 2.5 percentage points to 52.6 percent. Imports of materials by manufacturers continued to grow in January, at a slightly slower rate, as NAPM's Imports Index was down from 52.2 percent in December to 51.9 percent.
"The overall picture as we begin the new century is one of continuing growth in manufacturing activity during the month of January," added Ore. "While growth is still quite strong, the PMI for the last three months indicates some deceleration. Production growth is at a slower rate while New Orders strengthened slightly. The manufacturing sector appears to have momentum, but prices are rising to levels of concern, particularly with a new round of petroleum price increases."
Of the 20 industries in the manufacturing sector, fifteen reported improved business in January. Industries that reported improvement over December were (listed in order): Petroleum; Instruments & Photographic Equipment; Primary Metals; Chemicals; Wood & Wood Products; Apparel; Textiles; Furniture; Fabricated Metals; Paper; Transportation & Equipment; Industrial & Commercial Equipment & Computers; Tobacco; Rubber & Plastic Products; and Electronic Components & Equipment.
"Electronics is the only commodity reported on the Short Supply List. Commodities with reports of price increases were Alloys; Aluminum; Caustic Soda; Coated Paper; Copper; Corrugated Containers; Diesel; Hydrogen Peroxide; Natural Gas; Paper; Plastic; Plastic Resins; Polypropylene; Resins; Solvents; Stainless Steel; Steel; Steel Scrap; and Wood Pulp. Natural Gas is the only commodity down in price," Ore stated.
Jan vs Dec
|Rate of Change|
Jan vs Dec
|Backlog of Orders||52.0||Growing||From Unchanged|
|New Export Orders||52.6||Growing||Slower|
The Purchasing Managers' Index (PMI) indicates that the manufacturing economy continued to grow during the month of January, but at a slower rate, with an index of 56.3 percent. This is 0.5 percentage point lower when compared to December and the twelfth 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 42.4 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 PMI for January (56.3 percent), corresponds to a 4.4 percent annual increase in gross domestic product (GDP)."
NAPM's Production Index grew in January for the thirteenth consecutive month, registering 55.9 percent, a decrease of 3.1 percentage points when compared to the December index of 59.0 percent.
An index above 49.4 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 January were (listed in order): Instruments & Photographic Equipment; Petroleum; Wood & Wood Products; Furniture; Textiles; Chemicals; Rubber & Plastic Products; Transportation & Equipment; Fabricated Metals; Electronic Components & Equipment; and Industrial & Commercial Equipment & Computers.
NAPM's New Orders Index grew, at an accelerating rate in January with an index of 60.4 percent, an increase of 0.8 percentage point when compared to December. A New Orders Index above 50.4 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 January, twelve industries reported higher rates of increase in new orders. They were (listed in order): Chemicals; Petroleum; Textiles; Primary Metals; Apparel; Instruments & Photographic Equipment; Fabricated Metals; Rubber & Plastic Products; Paper; Industrial & Commercial Equipment & Computers; Transportation & Equipment; and Food.
The Backlog of Orders Index accelerated in January when compared to December. NAPM's Backlog of Orders Index (not seasonally adjusted) registered 52 percent, an increase of 2 percentage points. Of the 88% of respondents who measure their backlog of orders, 20 percent reported greater backlogs, 16 percent reported smaller backlogs, and 64 percent reported no change from December. Eight industries reported an increase in backlog of orders during the month: Leather; Electronic Components & Equipment; Textiles; Rubber & Plastic Products; Primary Metals; Paper; Fabricated Metals; and Chemicals.
NAPM's Supplier Deliveries Index in January indicates delivery performance continued to slow, but at a decelerating rate, with an index reading of 55.2 percent (a reading below 50 indicates faster delivery performance). The index is 1.5 percentage points lower than December's 56.7 percent. January marks the ninth consecutive month that the index has registered above 50. The industries reporting slower supplier deliveries in January were: Electronic Components & Equipment; Printing & Publishing; Wood & Wood Products; Petroleum; Paper; Primary Metals; Industrial & Commercial Equipment & Computers; Fabricated Metal Products; and Food.
NOTE: A list of commodities in short supply is available at the end of this report.
Manufacturers' inventories are reported higher in January as the Inventories Index registered 53.4 percent, up from 47.8 percent in December; manufacturers' apparently were not able to dispose of Y2K related inventory during January.
An Inventories Index greater than 41.1 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis' (BEA) figures on overall manufacturing inventories (constant 1987 dollars). The eight industries reporting higher inventories in January over December were: Instruments & Photographic Equipment; Primary Metals; Petroleum; Tobacco; Printing & Publishing; Food; Paper; and Fabricated Metals.
NAPM's Manufacturing Employment Index continued above 50 in January for the ninth consecutive month. The index registered 52.7 percent in January compared to 54.6 percent in December, a decrease of 1.9 percentage points. An Employment Index above 47.2 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: Apparel; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Wood & Wood Products; Furniture; Printing & Publishing; Primary Metals; and Transportation & Equipment.
NAPM's Price Index is 72.6 percent in January, 4.3 percentage points higher than the 68.3 percent recorded for December. Manufacturers continue to pay higher prices as the Index has been above 50 percent for nine consecutive months, with the last five months above 60 percent. In January, 42 percent of purchasing executives reported paying higher prices and 5 percent reported paying lower prices, while 53 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 seventeen industries paying higher prices were: Printing & Publishing; Paper; Leather; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Rubber & Plastic Products; Electronic Components & Equipment; Fabricated Metals; Primary Metals; Transportation & Equipment; Industrial & Commercial Equipment & Computers; Chemicals; Apparel; Textiles; Food; Wood & Wood Products; Instruments & Photographic Equipment; and Furniture.
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 January continued positive (an index exceeding 50 percent) for the twelfth consecutive month. NAPM's New Export Orders Index declined 2.5 percentage points to 52.6 percent for the month of January. Industries reporting growth in new export orders in January were: Rubber & Plastic Products; Tobacco; Printing & Publishing; Instruments & Photographic Equipment; Industrial & Commercial Equipment & Computers; Electronic Components & Equipment; and Chemicals.
Imports of materials by manufacturers continued to grow in January, but at a slightly decelerating rate with an index of 51.9 percent. The Imports Index is 0.3 percentage point lower than December's report of 52.2 percent. The seven industries reporting growth in import activity for January were: Leather; Fabricated Metals; Instruments & Photographic Equipment; Rubber & Plastic Products; Electronic Components & Equipment; Chemicals; and Industrial & Commercial Equipment & Computers.
Average commitment leadtime for Capital Expenditures rose 2 days to 118 days in January. Average leadtime for Production Materials is unchanged at 46 days. Average leadtime for Maintenance, Repair, and Operating (MRO) supplies is 26 days, up 2 days from December.
Alloys; Aluminum — 9th month; Caustic Soda — 5th month; Coated Paper; Copper; Corrugated Containers — 11th month; Diesel; Hydrogen Peroxide; Natural Gas (also reported down in price); Paper — 8th month; Plastic — 3rd month; Plastic Resins; Polypropylene — 9th month; Polystyrene — 2nd month; Resins — 5th month; Solvents; Stainless Steel — 6th month; Steel — 6th month; Steel Scrap; and Wood Pulp.
Natural Gas (also reported 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 42.4 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 47,000 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 February 2000 data will be released at 10:00 a.m. (ET) on March 1, 2000.