NAPM: Manufacturing continues to slow in November

Economic activity in the manufacturing sector declined for the 16th consecutive month in November. The overall economy returned to growth after registering a significant decline in October say the nation's purchasing and supply executives in the latest Manufacturing NAPM Report On Businessﾮ.


The report was issued by 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. "After absorbing last month's aftershock of the terrorist attacks, the manufacturing sector showed surprising resilience in November as New Orders gained 10.5 percentage points, which is among the largest one-month increase in the history of the index. The trend is definitely in the right direction, but it is too soon to claim an eminent recovery. Based on this report, the sector regained a significant portion of the output lost in October. The fact that five of 20 industries recorded strength in new orders is encouraging."


NAPM's Backlog of Orders Index indicates that order backlogs declined for the 19th consecutive month. NAPM's Supplier Deliveries Index continues to reflect faster deliveries. Manufacturing employment continued to decline in November as the index fell below the breakeven point (an index of 50 percent) for the 14th consecutive month. NAPM's Prices Index remained below 50 percent as manufacturers experienced lower prices for the ninth consecutive month. New Export Orders contracted in November for the third consecutive month. November's Imports Index moved upward but still failed to show growth for the month. Comments from purchasing and supply executives this month reflect continuing concern about the overall economy, but appear more optimistic than last month.


NAPM's PMI is 44.5 percent in November, an increase of 4.7 percentage points from the 39.8 percent reported in October. NAPM's Production Index rose 6.2 percentage points from 40.9 percent in October to 47.1 percent in November. NAPM's New Orders Index rose a significant 10.5 percentage points from 38.3 percent in October to 48.8 percent in November. NAPM's Backlog of Orders Index rose from 36 percent in October to 38.5 percent in November. NAPM's Supplier Deliveries Index declined from 49.2 percent to 47.3 percent in November. The NAPM Employment Index is at 35.7 percent for November, an increase of 0.6 percentage point when compared to the 35.1 percent reported in October. NAPM's Prices Index in November is 31.6 percent, a decrease of 0.9 percentage point from October's 32.5 percent.


NAPM's Inventories Index is at 37.9 percent indicating a slower rate of inventory liquidation when compared to October's 36.8 percent. Responding to a special monthly question concerning customers' inventories of products purchased from their organizations, 12 percent of the purchasing and supply executives felt they were too high, while 23 percent felt they were too low and 65 percent thought they were about right. NAPM's New Export Orders Index registered 49.3 percent, up from October's 45 percent. Imports of materials by manufacturers failed to grow as NAPM's Imports Index is 49.8 percent for the month, up from October's 46.3 percent.


"The overall picture is one of continued decline in manufacturing activity during the month of November," added Ore. "The manufacturing decline is now in its 16th month and even with this month's signs of encouragement, it takes time to build a recovery across the sector. The sharp decline in new orders and production during October signaled the possibility of an involuntary inventory build, but is not confirmed by the data."


Of the 20 industries in the manufacturing sector, five industries reported growth: Tobacco; Food; Apparel; Instruments & Photographic Equipment; and Glass, Stone & Aggregate.


"Coal was the only commodity reported on the Short Supply List. Natural Gas was reported up in price (also reported down in price). The commodities reported down in price are: Aluminum, Caustic Soda, Chemicals, Copper, Corrugated Containers, Energy, Fuel, Gasoline, Natural Gas (also reported up in price), Oil, Paper, High Density Polyethylene, Resins, Stainless Steel, and Steel," Ore stated.