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NAPM REPORT ON BUSINESS
Manufacturing Growth Continues In September
Say Purchasing Executives
In Latest NAPM Report On Business
Purchasing Managers' Index (PMI) At 54.2%
Production And New Orders Growing,
Prices Higher, Employment Continues Growth
Economic activity in the manufacturing sector grew at a slower rate in September 1997 than in August 1997. The overall economy continued to grow in September for the seventy-seventh 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 September than in August with Production and New Orders continuing to grow but at slower rates,” said Ore. “Supplier Deliveries continued to indicate slow delivery performance. NAPM's Price Index indicated increases in prices paid when compared to the previous month. Use of imports and New Export Orders increased, but at a slower rates. Purchasing executives' comments on business conditions indicated fewer problems in their supply chain. Major concerns were seasonal ups and downs and labor availability, primarily in the Midwest.”
The Purchasing Managers' Index decreased to 54.2% in September from 56.8% in August. NAPM's Production Index decreased 5.0 percentage points from 62.4% to 57.4%. NAPM's New Orders Index fell 4.8 percentage points from 60.6% to 55.8%. NAPM's Backlog of Orders Index registered 50.0% indicating neither expansion nor decline.
NAPM's Supplier Deliveries Index in September indicates deliveries are slowing at a slightly slower rate. The index was down .6 percentage points to 55.2% from August's index of 55.8%. NAPM's Employment Index continued to indicate growth in manufacturing employment with an index of 50.7% down from 52.0% in August. NAPM's Price Index in September rose to 54.7%, an increase of .9 percentage points from the August index of 53.8%, indicating higher prices for the commodities purchased by manufacturers.
NAPM's Inventories Index showed continued inventory liquidation, but at a slower rate than in August. The Inventories Index rose to 46.9% from 42.8% in August. Responding to a special monthly question concerning customers' inventories of products purchased from the purchasers' organizations, 13% of the purchasing executives felt they were too high (down from 16% in August). On the other hand, 14% (down from 22% in August), felt they were too low, and 73% (up from 62% in August), thought they were about right.
NAPM's New Export Orders Index declined 1.5 percentage points to 50.8%, remaining above 50% for the past nineteen months. Imports of materials by manufacturers increased, but at a slower rate as NAPM's Imports Index was down 1.6 percentage points to 53.1% from 54.7% in August.
“The overall picture in September 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 prices were reported higher by eleven industries. However, when you consider the list of commodities showing prices higher, there appears little reason for concern. Given the rates of production of recent months and the continued strength in new orders, it is a remarkably short list.”
Of the twenty industries in the manufacturing sector, twelve reported an improvement in September. Industries that reported improvement–listed in order–over August were: Petroleum; Paper; Furniture; Chemicals; Transportation & Equipment; Food; Instruments & Photographic Equipment; Rubber & Plastic Products; Printing & Publishing; Industrial & Commercial Equipment & Components; Leather; and Electronic Components & Equipment.
“Bearings and Titanium Dioxide were the commodities with reports of being in short supply. Aluminum, Caustic Soda, Corrugated Containers, Linerboard, Natural Gas, Soybean Oil, and Zinc were the commodities reported with price increases. Commodities with reports of price decreases include Aluminum, Copper, Nickel, Polyethylene, Polypropylene, and Semiconductors,” Ore stated.
Purchasing Managers' Index (PMI)
The Purchasing Managers' Index (PMI) indicated growth in September with an index of 54.2% compared to 56.8% in August. This indicates that the manufacturing economy grew, but at a slower pace in September than it did in August. September is the sixteenth 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 September (55.2%), if continued for all of 1997, corresponds to a +3.9% (increase) in real gross domestic product (GDP) for 1997. However, if the PMI for September of 54.2% turned out to be the annual average for 1997, this would correspond to a +3.6% (increase in real GDP).”
Index Sep 97 Aug 97 Jul 97 Jun 97 Purchasing Managers' 54.2 56.8 58.6 55.7 Production 57.4 62.4 64.4 56.0 New Orders 55.8 60.6 64.6 62.0 Backlog of Orders 50.0 60.0 56.5 53.5 Supplier Deliveries 55.2 55.8 55.3 54.6 Inventories 46.9 42.8 46.5 43.2 Employment 50.7 52.0 50.7 52.7 Prices 54.7 53.8 53.6 48.1 New Export Orders 50.8 55.9 57.1 54.3 Imports 53.1 54.7 53.2 55.4
October 1, 1997National Association of Purchasing Managers
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