FOR RELEASE: January 6, 1999

CONTACT:	Zenobia Daruwalla
	NAPM Media Relations
	602/752-6276 ext. 3015

NON-MANUFACTURING BUSINESS DECREASES SLIGHTLY IN DECEMBER 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 December 1998.

Business Activity Index at 49.5%
New Orders and Employment Decrease
Backlog of Orders Decreases for Third Month

(Tempe, Arizona) — Business in the non-manufacturing sector contracted slightly in December 1998 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 December, NAPM's Non-Manufacturing Business Activity Index registered reduced activity compared to November, indicating a slight weakness in the non-manufacturing sector," Kauffman said. "New Orders and Employment also contracted in December, Backlog of Orders decreased, and Supplier Deliveries were slower than in November. Inventories of non-manufacturing firms grew at a slow rate, and New Export Orders and use of Imports decreased for the third consecutive month. Prices paid by non-manufacturing organizations for materials and services decreased at a slower rate in December, and the Non-Manufacturing Inventory Sentiment Index indicated that purchasing executives are feeling more uncomfortable with the current level of inventories in December," Kauffman said.

"NAPM's Non-Manufacturing Business Activity Index indicated reduced business activity by dropping below 50.0 percent for the first time since the inception of the survey in July 1997. The index for December was 49.5 percent compared to November's 53.0 percent. Comments from purchasing executives are mixed, but on balance negative on business activity in December. Increased business activity in December was reported by 22 percent of purchasers compared to 26 percent who reported increased business in November. Also in December, of the industry groups reporting in the NAPM non-manufacturing survey, six indicated increased activity, nine indicated decreased activity, and one reported no change in activity level. In November, nine industry groups reported increased activity, six indicated decreased activity, and two advised no change," said Kauffman. Other significant indicators in December include decreased new orders, decreased employment, and decreased order backlogs. NAPM's New Orders and Employment indexes both indicated decreases by dropping below 50.0 percent for the first time since the inception of NAPM's non-manufacturing survey. Backlog of Orders registered its third consecutive monthly decrease in December.

These indications collectively project a non-manufacturing sector that is contracting slightly but many members indicate that the December slowdown is due to seasonal factors. Incorporating the December Business Activity Index results in an average non-manufacturing Business Activity Index for the year of 57.3 percent.

"Overall in December, non-manufacturing industries' reported decreased business activity and reduced employment while experiencing lower levels of new orders. Concerns of purchasing executives in non-manufacturing industries in December include high inventory levels relative to current demand and a slowdown in business activity," Kauffman commented.

NAPM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE

Series	December Indexes	November Indexes	Dec. vs. Nov. Index Change	Direction and Rate of Change
Business Activity	49.5	53.0	-3.5	Decrease from Increase
New Orders	48.5	52.5	-4.0	Decrease from Increase
Backlog of Orders	47.0	46.5	+0.5	Decreasing Slower
New Export Orders	49.0	45.0	+4.0	Decreasing Slower
Inventory Change	50.5	50.0	+0.5	Increase from Unchanged
Inventory Sentiment	64.5	63.0	+1.5	Greater feeling of "too high"
Imports	48.0	49.5	-1.5	Decreasing Faster
Prices	45.5	45.0	+0.5	Decreasing Slower
Employment	49.5	52.5	-3.0	Decrease from Increase
Supplier Deliveries	53.0	50.0	+3.0	Slower from Unchanged

COMPARISON OF NAPM NON-MANUFACTURING AND NAPM MANUFACTURING SURVEYS*

Business Activity in non-manufacturing industries and Production in manufacturing industries both decreased in December with a faster rate of decrease in manufacturing Production. New orders and backlog of orders also declined in both non-manufacturing and manufacturing, both with faster rates of decline in manufacturing. Prices declined in both areas of economic activity in December with the manufacturing sector reporting a more rapid rate of decrease. Inventories increased slightly in non-manufacturing industries, while decreasing at a faster rate in manufacturing. New export orders decreased in both sectors in December, with manufacturing experiencing a more rapid rate of decrease. Supplier delivery performance in December was reported to be slower than in November by non-manufacturers but faster by manufacturers. Use of Imports was down in both the non-manufacturing and manufacturing sectors, but declined at a faster rate in non-manufacturing.

Non-Manufacturing Survey Questions	Indexes	Manufacturing Survey Questions	Indexes
Business Activity	49.5	Production	46.5
New Orders	48.5	New Orders	46.0
Backlog of Orders	47.0	Backlog of Orders	37.0
New Export Orders	49.0	New Export Orders	45.5
Inventory Change	50.5	Inventories	41.8
Inventory Sentiment	64.5
Imports	48.0	Imports	49.8
Prices	45.5	Prices	31.3
Employment	49.5	Employment	40.8
Supplier Deliveries	53.0	Supplier Deliveries	48.5

* 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 declined to 49.5 percent in December from 53.0 percent in November. This indicates a decrease in business activity in the non-manufacturing sector in December compared to November 1998, and is the first decrease reported for business activity since the inception of the NAPM non-manufacturing business survey in July 1997. Respondent comments in December were mixed but, on balance, indicating reduced business activity. Many purchasers' comments indicated that the lessened activity in December was due to seasonal factors.

Respondents reporting better business in December numbered 22 percent compared to the 26 percent who said things were better in November. The six industries reporting growth of business activity in December were: Agriculture; Insurance; Retail Trade; Utilities; Real Estate; and Entertainment. Those reporting the highest rates of decrease in business activity in December were: Mining; Communication; Wholesale Trade; and Business Services.

Business Activity	% Higher	% Same	% Lower	Index
December 1998	22	55	23	49.5
November 1998	26	54	20	53.0
October 1998	27	53	20	53.5
September 1998	32	54	14	59.0
August 1998	24	56	20	52.0
July 1998	33	49	18	57.5
June 1998	37	49	14	61.5
May 1998	40	48	12	64.0
April 1998	38	50	12	63.0
March 1998	31	57	12	59.5
February 1998	34	49	17	58.5
January 1998	31	52	17	57.0

Non-Manufacturing New Orders

NAPM's Non-Manufacturing New Orders Index decreased in December compared to November. This is the first decrease in New Orders reported since the inception of NAPM's non-manufacturing business survey in July 1997. NAPM's Non-Manufacturing New Orders Index for December was 48.5 percent compared to November's 52.5 percent. Comments from respondents included: "Anticipated sales not occurring," "Seasonal reductions," "Year-end slowdown," and "Capital purchases are down."

The seven industries reporting growth of new orders in December were: Retail Trade; Insurance; Real Estate; Utilities; Health Services; Public Administration; and Business Services. The industries reporting the highest rates of decrease of new orders in December were: Communication; Construction; Entertainment; Wholesale Trade; Mining; and Transportation.

New Orders	% Higher	% Same	% Lower	Index
December 1998	21	55	24	48.5
November 1998	26	53	21	52.5
October 1998	26	55	19	53.5
September	30	54	16	57.0
August 1998	29	53	18	55.5
July 1998	29	52	19	55.0
June 1998	33	52	15	59.0
May 1998	38	51	11	63.5
April 1998	38	47	15	61.5
March 1998	28	59	13	57.5
February 1998	31	56	13	59.0
January 1998	28	51	21	53.5

Non-Manufacturing Backlog of Orders

NAPM's Non-Manufacturing Backlog of Orders Index indicated 47.0 percent in December, an increase from November's 46.5 percent and the third consecutive month of reduced order backlogs. Purchasing executives' comments on this month's backlog of orders report included: "Slower year-end," "Suppliers are filling backorders faster," "Backordering less," "Awaiting new capital budgets." Of the total respondents in December, 25.5 percent indicated they do not measure backlog of orders.

The three industries reporting growth of backlog of orders in December were: Insurance; Health Services; and Construction.

Backlog of Orders	% Higher	% Same	% Lower	Index
December 1998	13	68	19	47.0
November 1998	8	77	15	46.5
October 1998	17	64	19	49.0
September 1998	19	70	11	54.0
August 1998	24	65	11	56.5
July 1998	21	62	17	52.0
June 1998	17	66	17	50.0
May 1998	22	62	16	53.0
April 1998	15	72	13	51.0
March 1998	15	73	12	51.5
February 1998	14	75	11	51.5
January 1998	15	68	17	49.0

Non-Manufacturing Supplier Deliveries

The delivery performance of suppliers to non-manufacturing organizations was slower in December than in November. NAPM's Non-Manufacturing Supplier Deliveries Index for December was 53.0 percent compared to November's 50.0 percent. Comments from respondents included: "Everything is urgent," "Suppliers maintaining less inventory", "December always slow," and "Backlog on some orders."

The industries that reported the highest rates of slower supplier deliveries in December were: Agriculture; Entertainment; Wholesale Trade; Utilities; Transportation; and Health Services.

Supplier Deliveries	% Higher	% Same	% Lower	Index
December 1998	5	84	11	53.0
November 1998	9	82	9	50.0
October 1998	6	81	13	53.5
September 1998	5	84	11	53.0
August 1998	6	80	14	54.0
July 1998	5	81	14	54.5
June 1998	5	83	12	53.5
May 1998	8	83	9	50.5
April 1998	5	86	9	52.0
March 1998	4	87	9	52.5
February 1998	3	90	7	52.0
January 1998	4	84	12	54.0

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 decreased for the third consecutive month in December, but at a slower rate of decrease than reported in November. NAPM's Non-Manufacturing New Export Orders Index was 49.0 percent in December compared to 45.0 percent in November. Of the total respondents in December, 77.6 percent indicated they either do not perform, or do not separately measure, orders for work outside the U.S.

The only two industries with growth of new export orders in December were: Retail Trade; and Business Services.

New Export Orders	% Higher	% Same	% Lower	Index
December 1998	12	74	14	49.0
November 1998	10	70	20	45.0
October 1998	10	77	13	48.5
September 1998	12	84	4	54.0
August 1998	19	70	11	54.0
July 1998	16	71	13	51.5
June 1998	23	64	13	55.0
May 1998	20	57	23	48.5
April 1998	27	59	14	56.5
March 1998	24	69	7	58.5
February 1998	19	65	16	51.5
January 1998	18	68	14	52.0

Non-Manufacturing Imports

Use of imported materials by non-manufacturing industries decreased for the third consecutive month in December, and at a faster rate of decrease than in November. NAPM's Non-Manufacturing Imports Index for December was 48.0 percent, compared to 49.5 percent in November. In December, 70.3 percent of respondents reported that they do not use or do not track use of imported materials.

The three industries that indicated increased use of imports in December were: Health Services; Entertainment; and Transportation.

Imports	% Higher	% Same	% Lower	Index
December 1998	12	72	16	48.0
November 1998	15	69	16	49.5
October 1998	10	76	14	48.0
September 1998	16	77	7	54.5
August 1998	16	78	6	55.0
July 1998	13	79	8	52.5
June 1998	21	70	9	56.0
May 199	18	72	10	54.0
April 1998	13	80	7	53.0
March 1998	14	78	8	53.0
February 1998	14	76	10	52.0
January 1998	10	73	17	46.5

Non-Manufacturing Inventory Change

Material inventories maintained by non-manufacturing organizations increased slightly in December. NAPM's Non-Manufacturing Inventories Index registered 50.5 percent in December, compared to 50.0 percent in November. Of the total respondents in December, 25.8 percent indicated they do not have inventories. Comments from respondents included: "Building inventory for busy season," "Purchasing materials for new construction," "Anticipated higher demand," and "Working inventory down to level of business."

The industries reporting the highest rates of growth of inventories in December were: Insurance; Agriculture; Entertainment; Real Estate; Business Services; and Retail Trade.

Inventory Change	% Higher	% Same	% Lower	Index
December 1998	25	51	24	50.5
November 1998	22	56	22	50.0
October 1998	21	55	24	48.5
September 1998	21	59	20	50.5
August 1998	19	58	23	48.0
July 1998	21	54	25	48.0
June 1998	20	59	21	49.5
May 1998	21	58	21	50.0
April 1998	27	51	22	52.5
March 1998	23	59	18	52.5
February 1998	21	59	20	50.5
January 1998	23	51	26	48.5

Non-Manufacturing Inventory Sentiment

The December NAPM Non-Manufacturing Inventory Sentiment Index of 64.5 percent reflects an increase of 1.5 percentage points from the November reading of 63.0 percent. The higher December index of inventory sentiment indicates that non-manufacturing purchasing executives felt more uncomfortable with current levels of inventory and shared the "too high" sentiment to a greater extent in December than in November. In December, 36 percent of members felt their inventories were too high (30 percent in November). Also in December, seven percent indicated their inventories were too low, (compared to four percent in November), and 57 percent said that their inventories were about right (66 percent in November).

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

Inventory Sentiment	% Higher	% Same	% Lower	Index
December 1998	36	57	7	64.5
November 1998	30	66	4	63.0
October 1998	39	53	8	65.5
September 1998	36	58	6	65.0
August 1998	34	57	9	62.5
July 1998	30	61	9	60.5
June 1998	40	58	2	69.0
May 1998	34	59	7	63.5
April 1998	38	57	5	66.5
March 1998	31	66	3	64.0
February 1998	26	67	7	59.5
January 1998	26	71	3	61.5

Non-Manufacturing Prices

Prices paid by non-manufacturing organizations for purchased materials and services decreased at a slightly slower rate in December than in November. NAPM's Non-Manufacturing Price Index increased to 45.5 percent in December, compared to 45.0 percent in November. December marks the tenth month of either a decrease or no change in prices paid by non-manufacturing industries after eight consecutive months of price increases.

The four industries reporting higher prices paid in December were: Retail Trade; Health Services; *Other Services; and Business Services.

Prices	% Higher	% Same	% Lower	Index
December 1998	5	81	14	45.5
November 1998	5	80	15	45.0
October 1998	10	76	14	48.0
September 1998	5	79	16	44.5
August 1998	10	78	12	49.0
July 1998	9	76	15	47.0
June 1998	9	74	17	46.0
May 1998	10	76	14	48.0
April 1998	10	80	10	50.0
March 1998	10	78	12	49.0
February 1998	15	75	10	52.5
January 1998	15	75	10	52.5

Non-Manufacturing Employment

Employment in the non-manufacturing sector decreased in December for the first time since the inception of the NAPM non-manufacturing business survey in July 1997. NAPM's Non-Manufacturing Employment Index for December was 49.5 percent compared to the November reading of 52.5 percent. Comments from respondents included: "Lower seasonal activity," "Continued reduction in force," "Retirements and resignations," and "Increased employment due to merger, for now."

The five industries reporting growth of employment in December were: Agriculture; Retail Trade; Finance and Banking; Public Administration; and *Other Services. The industries reporting the highest rates of employment decrease in December were: Business Services; Insurance; Utilities; Mining; Entertainment; and Communication.

Employment	% Higher	% Same	% Lower	Index
December 1998	13	73	14	49.5
November 1998	18	69	13	52.5
October 1998	16	73	11	52.5
September 1998	16	72	12	52.0
August 1998	15	74	11	52.0
July 1998	24	62	14	55.0
June 1998	22	65	13	54.5
May 1998	21	66	13	54.0
April 1998	18	70	12	53.0
March 1998	21	68	11	55.0
February 1998	20	64	16	52.0
January 1998	18	70	12	53.0

*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

Labor (Personnel in general) — 3rd month; Laptop computers — 2nd month.

Commodities Reported Up in Price

None.

Commodities Reported Down in Price

Computers — 8th month; Diesel Fuel; Fittings — 3rd month; Fuel — 5th month; Gasoline; Paper — 5th month; PCs — 12th month; Printers. Steel pipe — 4th month.

December 1998 Non-Manufacturing Release Continued ...

Back to Top