FOR RELEASE: February 5, 2001

Contact:	Kristen Kioa
	NAPM, Media Relations
	Tempe, Arizona
	800/888-6276, Ext. 3015

NON-MANUFACTURING BUSINESS ACTIVITY GROWS AT A SIGNIFICANTLY SLOWER RATE IN JANUARY 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 January 2001.

Beginning with this month's report, the indexes for Business Activity, New Orders, Imports, and Employment are seasonally adjusted. The remaining indexes do not currently exhibit identifiable seasonality.

New Orders, Order Backlogs, and Inventories Decrease
Prices Increase Faster
Exports and Employment Increase More Slowly

(Tempe, Arizona) — Business in the non-manufacturing sector grew more slowly in January 2001 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 January, NAPM's Non-Manufacturing Business Activity Index just barely continued its long-term growth trend as growth was much slower than in December," Kauffman said. "New Orders and Order Backlogs decreased, Exports and Employment increased more slowly, and Imports were unchanged from December. Inventories declined in January and Supplier Deliveries continued its trend of slowness in January at a slightly increased rate of slowing. Prices increased at a faster rate and the Non-Manufacturing Inventory Sentiment Index indicated that purchasing executives felt a greater degree of discomfort with the level of inventories in January than they did in December," Kauffman said.

"NAPM's Non-Manufacturing Business Activity Index registered 50.1 percent in January, 11 percentage points lower than in December, indicating significantly slower growth in non-manufacturing economic activity. Many of the comments from purchasing executives are indicative of the generally slower growth of business activity in January. Increased business activity in January was reported by 23 percent of purchasers, a decrease of 6 percentage points from the 29 percent reporting more activity in December. Of the industry groups reporting in the January NAPM non-manufacturing survey, 7 indicated increased activity, 9 indicated decreased activity, and 1 reported no change in activity compared to December. In December, 10 industry groups reported increased activity, 5 reported decreased activity, and 2 reported no change in activity level," said Kauffman.

This month our members reported decreased inventories for the third consecutive month and also indicated a faster rate of increase in the prices they pay for their purchases. The Prices Index increased in January from 58 percent to 62 percent, the largest rise in one month since a seven point increase in February 2000. The Prices Index is still well below its high point of 72 percent, attained in March 2000. The percentage of members reporting higher prices increased to 28 percent in January from 22 percent in December, the proportion indicating no change dropped to 68 percent from 72 percent, and the number who noted lower prices decreased to 4 percent from 6 percent in December.

"Overall in January, non-manufacturing industries continued their long-term growth trend at a much decreased rate of growth compared to December. This month the Business Activity, New Orders, and Backlog of Orders Indexes decreased sharply, and the Imports Index also declined significantly from December levels. Non-manufacturing inventories decreased compared to December. Employment rose at a slower rate of increase, and Prices increased at a much faster rate in January," Kauffman commented.

NAPM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE

Series	January Indexes	December Indexes	Jan vs. Dec Index Change	Direction and Rate of Change
Business Activity	50.1	61.1	-11.0	Increasing Slower
New Orders	49.9	57.0	-7.1	Decreasing from Increasing
Backlog of Orders	42.5	50.5	-8.0	Decreasing from Increasing
New Export Orders	55.0	56.5	-1.5	Increasing Slower
Inventory Change	45.5	48.5	-3.0	Decreasing Faster
Inventory Sentiment	67.5	65.0	+2.5	Increased Feeling of "too high"
Imports	50.0	55.2	-5.2	Unchanged from Increasing
Prices	62.0	58.0	+4.0	Increasing Faster
Employment	52.3	52.8	-0.5	Increasing Slower
Supplier Deliveries	51.5	51.0	+0.5	Slowing at a Faster Rate

COMPARISON OF NAPM NON-MANUFACTURING AND NAPM MANUFACTURING SURVEYS*

Business Activity increased slightly in non-manufacturing industries and production decreased in manufacturing industries in January. New orders decreased for both the non-manufacturing and manufacturing sectors. Backlog of orders also decreased for both sectors. Prices increased in January for both areas but rose faster for manufacturing. Employment in January 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 increased more slowly in non-manufacturing but were reduced in manufacturing. Supplier delivery performance in January was reported to be slower in both non-manufacturing and manufacturing industries. Use of Imports was unchanged in non-manufacturing but decreased in manufacturing.

Non-Manufacturing Survey Questions	Indexes	Manufacturing Survey Questions	Indexes
Business Activity	50.1	Production	37.9
New Orders	49.9	New Orders	37.8
Backlog of Orders	42.5	Backlog of Orders	32.5
New Export Orders	55.0	New Export Orders	46.1
Inventory Change	45.5	Inventories	42.2
Inventory Sentiment	67.5
Imports	50.0	Imports	48.9
Prices	62.0	Prices	65.7
Employment	52.3	Employment	43.0
Supplier Deliveries	51.5	Supplier Deliveries	50.3

* 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 January dropped 11 percentage points to 50.1 percent, indicating barely increasing business activity compared to December (61.1 percent). Purchasing executives' comments in January reflected slower growth in economic activity. January's Index was the lowest since inception of the NAPM non-manufacturing business survey in July 1997. The percent of members reporting increased activity dropped to 23 percent in January from 29 percent in December. Members reporting decreased activity increased to 28 percent in January from 23 percent in December. Those reporting no change in activity in January totaled 49 percent, an increase of 1 percentage point from December's 48 percent.

The industries reporting the highest rates of growth of business activity in January were: Health Services; Public Administration; Mining; Real Estate; Finance and Banking; and Utilities.

Business Activity	% Higher	% Same	% Lower	Index*
January 2001	23	49	28	50.1
December 2000	29	48	23	61.1
November 2000	31	55	14	61.2
October 2000	32	52	16	58.8

*Index values are seasonally adjusted.

Non-Manufacturing New Orders

NAPM's Non-Manufacturing New Orders Index decreased to 49.9 percent in January from 57 percent in December. This was the lowest New Orders Index and the first month-to-month seasonally adjusted decline in new orders since inception of NAPM's non-manufacturing business survey in July 1997. Comments from members included: "General slowdown," "Reduction in consumer product movement," "General state of manufactured housing industry: inventory of finished goods too high," and "Less demand for scrap metal."

The industries reporting the highest rates of growth of new orders in January were: Legal Services; Health Services; Public Administration; Finance and Banking; and Mining. The industries reporting the highest rates of decline of new orders in January were: Wholesale Trade; Retail Trade; Transportation; Communication; and Insurance.

New Orders	% Higher	% Same	% Lower	Index*
January 2001	23	49	28	49.9
December 2000	26	50	24	57.0
November 2000	29	55	16	58.7
October 2000	30	55	15	58.1

*Index values are seasonally adjusted.

Non-Manufacturing Backlog of Orders

NAPM's Non-Manufacturing Backlog of Orders Index registered 42.5 percent in January. This indication of a decline in order backlogs is the first significant month-to-month drop since January 2000 (index 48.5 percent). The January index is an decrease of eight percentage points from December's 50.5 percent. Purchasing executives' comments on backlogs of orders included: "Filled (backlog) during slowdown," "Added more techs to reduce backlog," "Winter has arrived. Construction activity is down," and "Less scrap coming in from industrial accounts." Of the total respondents in January, 28 percent indicated they do not measure backlog of orders.

The industries reporting growth of backlog of orders in January were: Legal Services; Public Administration; Finance and Banking; and Health Services. The industries reporting the highest rates of decline of order backlogs in January were: Insurance; Retail Trade; Wholesale Trade; Business Services; Communication; and Entertainment.

Backlog of Orders	% Higher	% Same	% Lower	Index
January 2001	12	61	27	42.5
December 2000	20	61	19	50.5
November 2000	16	67	17	49.5
October 2000	21	65	14	53.5

Non-Manufacturing Supplier Deliveries

The delivery performance of suppliers to non-manufacturing organizations slowed at a slightly faster rate in January than in December. NAPM's Non-Manufacturing Supplier Deliveries Index for January was 51.5 percent compared to 51 percent in December. Comments from purchasing executives included: "Slower in some areas due to weather," Service is a major issue," "Lead times being extended," and "Holiday interruptions."

The industries that reported the highest rates of slowness of supplier deliveries in January were: Mining; Health Services; Insurance; Wholesale Trade; and Construction.

Supplier Deliveries	% Higher	% Same	% Lower	Index
January 2001	6	85	9	51.5
December 2000	7	84	9	51.0
November 2000	4	84	12	54.0
October 2000	2	87	11	54.5

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 January for the 11th consecutive month. January's Index was 55 percent, indicating a decreased rate of new export orders compared to December's Index of 56.5 percent. Of the total respondents in January, 77 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 January were: Wholesale Trade; **Other Services; Retail Trade; and Business Services.

New Export Orders	% Higher	% Same	% Lower	Index
January 2001	19	72	9	55.0
December 2000	24	65	11	56.5
November 2000	25	60	15	55.0
October 2000	23	64	13	55.0

Non-Manufacturing Imports

Use of imported materials by non-manufacturing industries, after growing for the past three months, were unchanged in January. NAPM's Non-Manufacturing Imports Index for January was 50 percent, a drop of 5.2 percentage points from the 55.2 percent reported in December. In January, 70 percent of respondents reported that they do not use or do not track use of imported materials.

The industries reporting increased use of imports in January were: Wholesale Trade; Business Services; and *Other Services.

Imports	% Higher	% Same	% Lower	Index*
January 2001	6	79	15	50.0
December 2000	14	75	11	55.2
November 2000	17	73	10	55.5
October 2000	18	79	3	57.9

*Index values are seasonally adjusted.

Non-Manufacturing Inventory Change

Material inventories maintained by non-manufacturing organizations decreased in January for the third consecutive month and the fourth time in 11 months. NAPM's Non-Manufacturing Inventories Index registered 45.5 percent in January, a decrease of three percentage points from the 48.5 percent reported in December. The January Index was the lowest index of inventory change since inception of NAPM's non-manufacturing business survey in July 1997. Of the total respondents in January, 26 percent indicated they do not have inventories. Comments from member purchasers included: "Trying to lower inventory," "Less business," "Coincides with decrease in sales last 2-3 months," and "Increased usage of existing stock."

The industries reporting inventory increases in January were: Legal Services; Agriculture; Transportation; Public Administration; and Health Services. The industries reporting the highest rates of inventory decrease in January were: Finance and Banking; Entertainment; Business Services; Construction; Utilities; and **Other Services.

Inventory Change	% Higher	% Same	% Lower	Index
January 2001	21	49	30	45.5
December 2000	24	49	27	48.5
November 2000	21	57	22	49.5
October 2000	25	60	15	55.0

Non-Manufacturing Inventory Sentiment

The NAPM Non-Manufacturing Inventory Sentiment Index in January registered 67.5 percent compared to 65 percent for December. This rise in the index level indicates that non-manufacturing purchasing executives felt a greater degree of discomfort with current levels of inventory in January than they did during December. In January, 36 percent of members felt their inventories were too high (35 percent in December). Also in January, 1 percent indicated their inventories were too low (5 percent in December), and 63 percent said that their inventories were about right (60 percent in December).

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

Inventory Sentiment	% Higher	% Same	% Lower	Index
January 2001	36	63	1	67.5
December 2000	35	60	5	65.0
November 2000	37	58	5	66.0
October 2000	38	59	3	67.5

Non-Manufacturing Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in January for the 23rd consecutive month and, at a higher rate of increase than in December. NAPM's Non-Manufacturing Prices Index for January moved up to 62 percent from 58 percent in December.

The industries that reported the highest rate of increase in prices paid in January were: Mining; Legal Services; Agriculture; Wholesale Trade; and Retail Trade.

Prices	% Higher	% Same	% Lower	Index
January 2001	28	68	4	62.0
December 2000	22	72	6	58.0
November 2000	21	72	7	57.0
October 2000	26	70	4	61.0

Non-Manufacturing Employment

Employment in the non-manufacturing sector grew at a slower rate in January than in December. NAPM's Non-Manufacturing Employment Index for January was 52.3 percent compared to 52.8 percent in December. The January Index was the lowest since July 2000 (50.7 percent). Comments from purchasers included: "Reducing staffs through attrition," "Downsized by early retirement programs," "Slow down in business," and "Still many job openings."

The industries reporting the highest rates of growth of employment in January were: Legal Services; Insurance; Utilities; Health Services; and Finance and Banking.

Employment	% Higher	% Same	% Lower	Index*
January 2001	13	74	13	52.3
December 2000	16	70	14	52.8
November 2000	19	71	10	54.3
October 2000	20	67	13	54.1

*Index values are seasonally adjusted.

**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

Caustic Soda; Copper Pipe and Tubing; Electricity; Fiber Optic Cable; Labor — 2nd month; Laptops — 11th month; Natural Gas; Temporary Help/Services — 5th month.

Commodities Reported Up in Price

Caustic Soda; Electrical (various items); Electricity; Energy — 2nd month; Freight; Fuel — 12th month (a few reports of price decreases); Medical/Surgical Supplies; Natural Gas — 2nd month; Paper — 22nd month (equal reports of price decreases); Postal Rates; Propane; Sugar; Suture.

Commodities Reported Down in Price

Butter; Computers (PCs) — 11th month; Gasoline — 2nd month; Laptop Computers; Memory; Paper (equal reports of price increases); Stainless Steel (various items).

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 180 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 February 2001 data will be released at 10:00 a.m. (ET) on March 5, 2001.

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