wmeubank@ocp.kcmo.com
NAPM REPORT ON BUSINESS
Manufacturing Growth Continues In October
Say Purchasing Executives
In Latest NAPM Report On Business
Purchasing Managers' Index (PMI) At 56.0%
Production And New Orders Growing,
Prices Higher, Employment Continues Growth
Economic activity in the manufacturing sector grew at a faster rate in October than in September. The overall economy continued to grow in October for the seventy-eighth 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 faster pace in October than in September with Production and New Orders growing at faster rates,” said Ore. “Supplier Deliveries continued to indicate slow delivery performance, while the Backlog of Orders Index grew significantly. Manufacturing Employment continued to grow and NAPM's Price Index again indicated increases in prices paid when compared to the previous month. Exports are growing at a slightly faster rate than in September and Use of Imports grew, but at a slower rate. Purchasing executives' comments on business conditions indicated an optimistic view of their markets with expectations positive for the remainder of the year.”
The Purchasing Managers' Index increased to 56.0% in October from 54.2% in September. NAPM's Production Index increased 2.6 percentage points from 57.4% to 60.0%. NAPM's New Orders Index rose 3.2 percentage points from 55.8% in September to 59.0% in October. NAPM's Backlog of Orders Index registered 56.5% indicating greater backlogs in the manufacturing sector.
NAPM's Supplier Deliveries Index in October indicates deliveries are slowing at a slightly slower rate. The index was down .5 percentage points to 54.7% from September's index of 55.2%. NAPM's Employment Index continued to indicate growth in manufacturing employment with an index of 52.4% up from 50.7% in September. NAPM's Price Index in October rose to 55.9%, an increase of 1.2 percentage points from the September index of 54.7%, indicating higher prices for the commodities purchased by manufacturers.
NAPM's Inventories Index showed continued inventory liquidation, but at a slightly faster rate than in September. Responding to a special monthly question concerning customers' inventories of products purchased from the purchasers' organizations, 10% of the purchasing executives felt they were too high (down from 13% in September). On the other hand, 16% (up from 14% in September), felt they were too low and 74% (up from 73% in September), thought they were about right.
NAPM's New Export Orders Index accelerated slightly, rising .8 percentage points to 51.6%, remaining above 50% for the past twenty months. Imports of materials by manufacturers increased, but at a slower rate as NAPM's Imports Index was down 1.6 percentage points to 51.5% from 53.1% in September.
“The overall picture in October as indicated by growth in production and new orders is one of continued growth in manufacturing activity,” added Ore. “The rate of growth of new orders and production is strong while supplies and deliveries of commodities do not appear to be a significant problem. Eleven industries reported paying higher prices, but comparison of reported price increases and decreases shows that there is slightly greater number of commodities going down in prices as opposed to up.”
Of the twenty industries in the manufacturing sector, fifteen reported an improvement in October. Industries that reported improvement–listed in order–over September were: Petroleum; Rubber & Plastic Products; Apparel; Paper; Instruments & Photographic Equipment; Food; Furniture; Glass, Stone & Aggregate; Transportation & Equipment; Fabricated Metals; Textiles; Electronic Components & Equipment; Industrial & Commercial Equipment & Computers; Primary Metals; and Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments).
“Electric Motors and Titanium Dioxide were the commodities with reports of being in short supply. Acetone, Aluminum, Caustic Soda, Corrugated Containers, Natural Gas, Paper, and Titanium Dioxide were the commodities reported with price increases. Commodities with reports of price decreases include Copper, Natural Rubber, Nickel, Polyethylene, Polypropylene, PVC, Resistors, and Zinc,” Ore stated.
Purchasing Managers' Index (PMI)
The Purchasing Managers' Index (PMI) indicated growth in October with an index of 56.0% compared to 54.2% in September. This indicates that the manufacturing economy grew at a faster pace in October than it did in September. October is the seventeenth 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 October (55.3%), if continued for all of 1997, corresponds to a +4.0% (increase) in real gross domestic product (GDP) for 1997. However, if the PMI for October of 56.0% turned out to be the annual average for 1997, this would correspond to a +4.2% (increase in real GDP).”
Index Oct 97 Sep 97 Aug 97 Jul 97 Purchasing Managers' 56.0 54.2 56.8 58.6 Production 60.0 57.4 62.4 64.4 New Orders 59.0 55.8 60.6 64.6 Backlog of Orders 56.5 50.0 60.0 56.5 Supplier Deliveries 54.7 55.2 55.8 55.3 Inventories 46.5 46.9 42.8 46.5 Employment 52.4 50.7 52.0 50.7 Prices 55.9 54.7 53.8 53.6 New Export Orders 51.6 50.8 55.9 57.1 Imports 51.5 53.1 54.7 53.2
November 3, 1997National Association of Purchasing Managers
Added to the WWW 11-07-97
Last updated on 11-08-97
Hosted by:
One Crossroads Place
610 West Maple Ave, Suite WWW
Independence, MO 64050
(816) 252-4080
sysop@kcmo.com