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Purchasing Managers' Index (PMI) at 55.7%,
Production And New Orders Growing,
Prices Deceasing, Employment Grows
Economic activity in the manufacturing sector grew at a slower rate in June 1997 than in May 1997. The overall economy continued to grow in June for the seventy-fourth consecutive month say the nation's purchasing executives in the latest 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 Business Survey Committee and director of purchasing, ipd/paper, Sonoco Products Company. "The manufacturing sector grew at a slower pace in June than in May with Production and New Orders growing at slower rates," said Ore. "Backlog of Orders grew and Supplier Deliveries continued to slow. NAPM's Price Index indicated continuing decreases in prices paid when compared to the previous month. Use of Imports and New Export Orders also grew for the month. Purchasing executives' comments on business conditions remain optimistic. A few concerns expressed are continuing softness in European markets, interest rates and manpower shortages. Many members continued to indicate strength in their markets."
The Purchasing Managers' Index decreased to 55.7% in June from 57.1% in May. NAPM's Production Index decreased 1.0 percentage points from 57.0% to 56.0%. NAPM's New Orders Index declined 2.2 percentage points from 64.2% to 62.2%. NAPM's Backlog of Orders Index reflected a lesser volume of unfilled orders during June with the index dropping 4.5 percentage points to 53.5%.
NAPM's Supplier Deliveries Index in May moved to 54.6% from 55.2% in May, indicating delivery performance continues to be slow. NAPM's Employment Index grew for the fourth month after twenty-four consecutive months of manufacturing employment reduction, with the index at 52.7% after registering 52.6% in May. NAPM's Price Index in June decreased to 48.1%, a decrease of 0.3 percentage points 52.6% in May. NAPM's Price Index in June decreased to 48.1%, indicating lower prices for the commodities purchased by manufacturers.
NAPM's Inventories Index decreased to 43.2% from 47.6% in May indicating a faster rate of inventory reduction. Responding to a special monthly question concerning customers' inventories of products purchased from the purchasers' organizations, 14% of the purchasing executives felt they were too high (up from 5% in May). On the other hand, 13% (from 16% in May) felt they were too low, and 73% (down from 79% in May), though they were about right.
NAPM's New Export Orders Index was unchanged at 54.3%, but has remained above 50% for the past sixteen months. Imports of materials by manufacturers increased as NAPM's Imports Index rose to 55.4% from 54.2% in May.
"The overall picture in June indicated by an increase in the growth rates of new orders, backlog of orders, and a continued reduction in prices is one of continued growth in manufacturing activity," added Ore. "The rate of growth of new orders is strong while prices are receding, with only five industries reporting that they are paying higher prices."
Of the twenty industries in the manufacturing sector, fifteen reported an improvement in June. Industries that reported improvement--listed in order--over April were: Furniture; Paper, Textiles; Industrial & Commercial Equipment & Computers; Food; Wood & Wood Products; Instruments & Photographic Equipment; Rubber and Plastic Products; Fabricated Metals; Petroleum; Chemicals; Glass, Stone & Aggregate; Electronic Components & Equipment; and Apparel.
"Bearings is the only commodity with reports of being in short supply. Aluminum, Caustic Soda, Copper, Natural Gas, Nylon, Plastic Resins, Plastic Products, and Platinum were the commodities reported with price increases. Commodities with reports of price decreases include Aluminum, Caustic Soda, Corrugated Containers, Natural Gas and Polystyrene. Aluminum, Caustic Soda and Natural Gas prices were heavily reported as both higher and lower during June," Ore stated.
Purchasing Managers' Index (PMI)
The Purchasing Managers' Index (PMI) indicated growth in June with an index of 55.7% compared 57.1% in May. This indicates that the manufacturing economy is growth at a slightly slower pace in June than it did on May. June is the thirteenth consecutive month that the PMI has indicated manufacturing growth. A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting.
A PMI in excess of 43.9%, 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 average PMI for the months of January through June (54.5%), if continued for all of 1997, corresponds to approximately a +3.7% (increase) in real gross domestic product (GDP) for 1997. However, if the PMI for June of 55.7% turned out to be the annual average for 1997, this would correspond to a +4.1% (increase) in real GDP."
Index Jun 97 May 97 Apr 97 Mar 97 Purchasing Managers' 55.7 57.1 54.2 55.0 Production 56.0 57.0 56.6 56.8 New Orders 62.0 64.2 57.9 60.3 Backlog of Orders 53.5 58.0 54.0 51.5 Supplier Deliveries 54.6 55.2 53.4 53.6 Inventories 43.2 47.6 41.2 43.7 Employment 52.7 52.6 52.8 51.6 Prices 48.1 48.4 49.6 50.9 New Export Orders 54.3 54.3 55.7 57.3 Imports 55.4 54.2 52.9 48.8
July 1, 1997 National Association of Purchasing Managers
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