FOR RELEASE: April 1, 1999
|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 March 1999.
(Tempe, Arizona) — Economic activity in the manufacturing sector continued on a path toward recovery with strong growth in March. The overall economy continued to grow in March for the 95th 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 continued to improve in March, finishing the first quarter in a very positive fashion. Production and new orders once again made solid gains. It appears that the manufacturing sector is on a path of recovery, but the commodities sectors are lagging in their recovery. Concern must once again be expressed about capital expenditures as last month the survey recorded the lowest number of days forward since NAPM first reported on that data in January 1987 and this month indicates a further deterioration. With many industries mired in excess capacity, it may be some months before this situation is reversed. NAPM's Backlog of Orders Index has strengthened significantly in the last two months and should help drive production in the second quarter. Though it appears that the manufacturing economy is growing, the continuing softness in commodity prices assures us that inflation is not an immediate concern."
NAPM's Backlog of Orders Index reversed its recent trend and indicates growing manufacturing order backlog, while NAPM's Supplier Deliveries Index indicated deliveries continue to slow. Manufacturing Employment declined in March for the tenth month, though at a slower rate. NAPM's Price Index continues to decline, and it too is at a slower rate. Export Orders are reported stronger, and appear to have reversed the downward trend that first surfaced in December 1997. Imports also grew during March, as they did in February after three months of decline. Purchasers report that they are working intensely with suppliers to mitigate Y2K concerns. Other concerns are the world economy and excess capacity. Overall sentiment seems to be optimistic at this time.
NAPM's Purchasing Managers' Index was higher at 54.3 percent in March. NAPM's Production Index increased 2.7 percentage points from 56.9 percent in February to 59.6 percent in March. NAPM's New Orders Index rose 1.0 percentage point from 57.2 percent in February to 58.2 percent in March. NAPM's Backlog of Orders Index registered 52.0 percent which is 3.5 percentage points higher than the 48.5 percent recorded in February.
NAPM's Supplier Deliveries Index continued slower in March as the index moved to 52.5 percent from 50.6 percent in February. The NAPM Employment Index continued to decline, but at a slower rate with an index of 48.0 percent up from 45.0 percent in February. NAPM's Price Index in March is 43.2 percent continuing a trend of deceleration that started in January 1998.
NAPM's Inventories Index showed continued inventory liquidation at a slower rate than in February. NAPM's Inventories Index rose to 44.6 percent from 44.2 percent in February. Responding to a special monthly question concerning customers' inventories of products purchased from the purchasers' organizations, 9 percent of the purchasing executives felt they were too high (up from 8 percent in February). On the other hand, 22 percent felt they were too low (same as February) and 69 percent thought they were about right (down from 70 percent in February).
NAPM's New Export Orders Index continued positive for a second month, though it decreased 2.3 percentage points to 51.7, it still reinforces signs of recovery in Asia. In February, the New Export Orders Index reversed a fourteen month decline. Imports of materials by manufacturers increased in March as NAPM's Imports Index was up 3.0 percentage points to 55.3 percent from 52.3 percent in February.
"The overall picture is one of continuing growth in manufacturing activity during the month of March," added Ore. "Production and New Orders once again strengthened and provide an indication that the manufacturing sector is finishing the first quarter on a positive note, with signs of optimism about the second quarter. Deliveries of commodities continued to slow and that is consistent with the positive signs that we see in other indexes. Commodity prices are declining at a slower rate, but only a few commodities appear on the up in price list."
Of the 20 industries in the manufacturing sector, thirteen reported improved business in March. Industries that reported improvement over February were (listed in order): Electronic Components & Equipment; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Food; Furniture; Industrial & Commercial Equipment & Computers; Apparel; Printing & Publishing; Chemicals; Instruments & Photographic Equipment; Rubber & Plastic Products; Wood & Wood Products; Transportation & Equipment; and Primary Metals.
"No commodities appeared on the Short Supply List. Commodities with reports of price increases were Corrugated Containers, Ethylene and Linerboard. Commodities with reports of price decreases include Aluminum, Caustic Soda, Copper, Gasoline, Natural Gas, Oil and Steel," Ore stated.
Mar vs Feb
|Rate of Change|
Mar vs Feb
|Backlog of Orders||52.0||Growing||From Contracting|
|New Export Orders||51.7||Growing||Slower|
The Purchasing Managers' Index (PMI) indicates that the manufacturing economy continued on a upward trend in March with an index of 54.3 percent. This is 1.9 percentage points higher when compared to February and the highest since November 1997. 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 43.5 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 the months of January through March (52.1 percent), corresponds to a 3.0 percent increase in gross domestic product (GDP). However, if the PMI for March (54.3 percent), turned out to be the annual average for 1999, this would corresponds to a 3.7 percent increase in real GDP."
NAPM's Production Index grew for the third consecutive month, registering a significant gain in manufacturer's production for the month. NAPM's Production Index in March is 59.6 percent, an increase of 2.7 percentage points when compared to the February index of 56.9 percent.
An index above 49.8 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 March were (listed in order): Electronic Components & Equipment; Furniture; Instruments & Photographic Equipment; Food; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Wood & Wood Products; Petroleum; Industrial & Commercial Equipment & Computers; Transportation & Equipment; Primary Metals; Chemicals; Rubber & Plastic Products; and Printing & Publishing.
NAPM's New Orders Index continued its strong rebound rising to 58.2 percent in March, an increase of 1.0 percentage point. A New Orders Index above 50.7 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 March, twelve industries reported higher rates of increase in new orders. They were (listed in order): Electronic Components & Equipment; Industrial & Commercial Equipment & Computers; Food; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Textiles; Petroleum; Chemicals; Furniture; Instruments & Photographic Equipment; Primary Metals; Printing & Publishing; and Transportation & Equipment.
NAPM's Backlog of Orders Index (not seasonally adjusted) increased in March after ten consecutive months of decline. The index recorded 52.0 percent, 3.5 percentage points higher than February, indicating a greater backlog of orders for the month of March. Five industries reported an increase in backlog of orders during the month: Industrial & Commercial Equipment & Computers; Wood & Wood Products; Chemicals; Fabricated Metals; and Electronic Components & Equipment.
NAPM's Supplier Deliveries Index in March indicates delivery performance is slower with an index reading of 52.5percent. This is the third consecutive month that NAPM's Supplier Deliveries Index has been above 50 and indicating slower performance. The industries reporting slower supplier deliveries in March were: Textiles; Primary Metals; Rubber & Plastic Products; Fabricated Metals; Chemicals; Printing & Publishing; Food; and Transportation & Equipment.
NOTE: A list of commodities in short supply is available at the end of this report.
Manufacturers' inventory activity in March indicated a slower rate of reduction than reported in February. NAPM's Inventories Index for March rose slightly to 44.6 percent from 44.2 percent in February. This continues a long-term trend of inventory reduction by manufacturers. An Inventories Index over 41.5 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 March over February were: Furniture; Food; and Fabricated Metals.
Manufacturing employment contracted at a slower rate in March as the index rose to 48.0 percent from 45.0 percent in February, an increase of 3.0 percentage points. This is the tenth consecutive month that the index has indicated a decline in manufacturing employment. An Employment Index above 47.0 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment. Eight industries indicated growth in employment and they were: Apparel; Tobacco; Wood & Wood Products; Electronic Components & Equipment; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Furniture; Food; and Printing & Publishing.
NAPM's Price Index continued to decline in March, but at a slower rate. NAPM's Price Index gained 7.3 percentage points to 43.2 percent, up from 35.9 percent in February. This index indicates lower prices paid by manufacturers for the fifteenth consecutive month. In March, 9 percent of purchasing executives reported paying higher prices, 26 percent reported paying lower prices, while 65 percent reported that prices were unchanged from the preceding month.
A Price Index below 46.7 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 is Primary Metals.
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 March continued positive for the second consecutive month after fourteen months of decline (an index exceeding 50 percent) with an index of 51.7 percent. NAPM's New Export Orders Index lost 2.3 percentage points during the month. Industries reporting growth in new export orders in March were: Petroleum; Wood & Wood Products; Printing & Publishing; Electronic Components & Equipment; Instruments & Photographic Equipment; Paper; and Industrial & Commercial Equipment & Computers.
Imports of materials by manufacturers grew in March with an index of 55.3 percent. The rate of growth is 3.0 percentage points higher than the 52.3 percent reported in February. The seven industries reporting growth in import activity for March were: Wood & Wood Products; Fabricated Metals; Rubber & Plastic Products; Industrial & Commercial Equipment & Computers; Furniture; Food; and Transportation & Equipment.
Average commitment leadtime for Capital Expenditures declined to 110 days in March, down 6 days from February (lowest number of days reported since NAPM began measuring that data in January 1987). Average leadtime for Production Materials is 46 days, up 3 days from February. Average leadtime for Maintenance, Repair, and Operating (MRO) supplies rose to 28 days, up 6 days from February.
No commodities reported in short supply.
Corrugated Containers; Ethylene; and Linerboard.
Aluminum — 17th month; Caustic Soda — 6th month; Copper — 21st month; Gasoline — 2nd month; Natural Gas — 4th month; Oil and Steel — 9th month.
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 43.5 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 180 affiliates with more than 44,000 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. (EST)
The next Manufacturing NAPM Report On Business® featuring the April 1999 data will be released at 10:00 a.m. (EDT) on May 3, 1999.