Manufacturing continues to slow in August

Economic activity in the manufacturing sector declined for the 13th consecutive month in August while the overall economy grew for the third consecutive month, say the nation's purchasing and supply management executives in the latest Manufacturing NAPM Report On Businessﾮ.

'The manufacturing sector continued to decline in August as has been the trend since August 2000. However, the rate of decline decelerated significantly during the month,' said Norbert J. Ore, C.P.M., chair of the National Association of Purchasing Management's Manufacturing Business Survey Committee and group director, strategic sourcing and procurement, Georgia-Pacific Corporation. 'Both production and new orders made marked improvement and recorded impressive growth after a lengthy period of decline, providing encouragement that a number of industries are starting to recover.'

NAPM's Backlog of Orders Index indicates that order backlogs declined for the 16th consecutive month. NAPM's Supplier Deliveries Index continues to reflect faster deliveries. Manufacturing employment continued to decline in August as the index fell below the breakeven point (an index of 50 percent) for the 11th consecutive month. NAPM's Prices Index remained below 50 percent as manufacturers experienced lower prices for the sixth consecutive month. New Export Orders grew in August after four consecutive months of decline. August's Imports Index decelerated significantly but still failed to grow for the eighth consecutive month. Comments from purchasing and supply managers this month reflect continuing concerns about overall business conditions. In line with the improvement in new orders and production, a number of members indicated that things are starting to improve in their markets.


NAPM's PMI is 47.9 percent in August, an increase of 4.3 percentage points from the 43.6 percent reported in July. NAPM's Production Index rose 5.8 percentage points from 46.4 percent in July to 52.2 percent in August. NAPM's New Orders Index rose 6.8 percentage points from 46.3 percent in July to 53.1 percent in August. NAPM's Backlog of Orders Index rose from 42.5 percent in July to 44.5 percent in August, but continues to indicate smaller backlogs. NAPM's Supplier Deliveries Index declined to 46.5 percent in August, indicating faster deliveries during the month. The NAPM Employment Index is at 40.8 percent for August, an increase of 3.6 percentage points when compared to the 37.2 percent reported in July. NAPM's Prices Index in August is 33.9 percent, a decrease of 4.8 percentage points from July's 38.7 percent.

NAPM's Inventories Index is at 37.7 percent indicating a slightly slower rate of inventory liquidation when compared to July's 35.8 percent. Responding to a special monthly question concerning customers' inventories of products purchased from the their organizations, 13 percent of the purchasing and supply executives felt they were too high (up from 9 percent in July), while 16 percent felt they were too low (down from 19 percent in July) and 71 percent thought they were about right (down from 72 percent in July). NAPM's New Export Orders Index registered 51.9 percent, up from July's 48.2 percent. Imports of materials by manufacturers continued to decline as NAPM's Imports Index fell just below 50 percent at 49.7 percent for the month and up from July's 47.3 percent.

'The overall picture is one of continued decline in manufacturing activity during the month of August,' added Ore. 'The manufacturing sector is in its 13th month of decline but appears to show signs of an upward movement as the PMI made its most significant gain since June 1996. It is particularly encouraging that 12 of 20 industries reported growth in new orders.'

Of the 20 industries in the manufacturing sector, seven reported growth: Leather; Food; Printing & Publishing; Glass, Stone & Aggregate; Furniture; Paper; and Fabricated Metals.