How Supply Managers See High-Tech Business
Staff -- Purchasing, 3/18/2004 2:00:00 AM
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Most major indicators continue to signal a strong manufacturing recovery. Purchasing's own Business Activity Index held strong at 67.8 in February (where 50 is the dividing line between expansion and contraction). Manufacturers' advance purchase plans for raw materials and components showed even stronger. Purchasing's 90-day Forward Demand Index for all manufacturers soared to 81.2 in February as 71% of buyers said they would increase purchase levels versus a mere 8% planning volume cutbacks. Some of that buying is likely to be for inventory as a hedge against stretching leadtimes and fast rising commodity price tags.
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Add plastic resins to the list of commodity groups where price inflation pressure is now rated as strong. Latest breakdown for the 17 major commodity categories tracked monthly by Purchasingdata.com: strong upward price pressure reported by buyers of plastic resins, aluminum, steel, copper and brass, fabricated metals, transportation and energy; moderate upward price pressure for molded plastics, semiconductors, passive electronic components, organic chemicals, inorganic chemicals, and tooling; minor to zero inflation for paper, corrugated, and industrial machinery. Deflation is still the dominant trend for computers.
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Don't count on big pay raises in 2004. "A relatively weak labor market will continue to restrain growth in private sector wages at least through mid-summer 2004," according to the latest Wage Trend Indicator report from BNA Inc. What it means: Labor rates are the prime mover behind general inflation rates. So, finished-goods inflation is likely to stay very low in 2004. That means industrial buyers, who are paying much higher prices for raw materials right now, are in for a very rough year.
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Expect another boost for consumer spending despite weak jobs growth. After rising through September of last year, home mortgage rates have been on a downward drift, falling just far enough to inspire a new round of refinancing activity. If U.S. consumers follow their recent pattern, they'll be taking plenty of cash out in the process and increasing discretionary income by reducing monthly mortgage payments.
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