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NAPM - Manufacturing continues to slow in October
November 2, 2001
Economic activity in the manufacturing sector declined for the 15th consecutive month in October while the overall economy also failed to grow after four consecutive months of growth say the nation's purchasing and supply executives in the latest Manufacturing NAPM Report On Businessﾮ.
"The manufacturing sector received a very significant setback driven by the events of September 11th. The trend lines were moving in a positive direction prior to this report," 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. "The declines in production and new orders are among the largest in the history of our report, which began in 1931. It is worth noting that the New Export Orders Index indicated a much sharper decline in September than in October, while the other indexes declined significantly in this reporting period ' possibly signaling a greater sense of confidence in global business during October."
NAPM's Backlog of Orders Index indicates that order backlogs declined for the 18th consecutive month. NAPM's Supplier Deliveries Index continues to reflect faster deliveries, although at a slower rate. Manufacturing employment continued to decline in October as the index fell below the breakeven point (an index of 50 percent) for the 13th consecutive month. NAPM's Prices Index remained below 50 percent as manufacturers experienced lower prices for the eighth consecutive month. New Export Orders contracted in October for the second consecutive month. October's Imports Index declined after slight growth in September. Comments from purchasing and supply executives this month reflect continuing concerns about overall business conditions. Aerospace, steel, and automotive are struggling while major construction appears to have come to a halt. A number of respondents indicated that they look for a six to 12 month recovery.
NAPM's PMI is 39.8 percent in October, a decrease of 7.2 percentage points from the 47 percent reported in September. NAPM's Production Index declined a significant 10.4 percentage points from 51.3 percent in September to 40.9 percent in October. NAPM's New Orders Index declined 12 percentage points from 50.3 percent in September to 38.3 percent in October. NAPM's Backlog of Orders Index fell from 43 percent in September to 36 percent in October. NAPM's Supplier Deliveries Index rose from 46.5 percent to 49.2 in October, indicating faster deliveries during the month, but at a slower rate. The NAPM Employment Index is at 35.1 percent for October, a decrease of 6.1 percentage points when compared to the 41.2 percent reported in September. NAPM's Prices Index in October is 32.5 percent, a decrease of 3.8 percentage points from September's 36.3 percent.
NAPM's Inventories Index is at 36.8 percent indicating a faster rate of inventory liquidation when compared to September's 38.9 percent. The special monthly question concerning customers' inventories of products purchased from their organizations, 11 percent of the purchasing and supply executives felt they were too high, while 22 percent felt they were too low and 67 percent thought they were about right. NAPM's New Export Orders Index registered 45 percent, down from September's 45.9 percent. Imports of materials by manufacturers slowed as NAPM's Imports Index is 46.3 percent for the month, down from September's 50.3 percent.
"The overall picture is one of continued decline in manufacturing activity during the month of October," added Ore. "The manufacturing sector is in its 15th month of decline. The sector appeared to be well on its way to recovery, but will have to begin anew to build its way into a growth scenario."
None of the 20 industries in the manufacturing sector reported growth in October.
"No commodities were reported on the Short Supply List. Sugar was the only commodity with reports of price increases. The commodities reported down in price are: Aluminum, Caustic Soda, Chemicals, Copper, Corrugated Containers, Diesel, Energy, Ethylene, Gasoline, Natural Gas, Plastic, High Density Polyethylene, Resins, Polypropylene, Stainless Steel, Steel and Zinc," Ore stated.