Buyers are more cautious, even as prices remain low
By Staff -- Purchasing, 5/6/1999
While buyers remain generally optimistic about business conditions, Purchasing's grassroots business survey detects a note of caution this month.Nationwide, 60% of buyers say business is either the same or better than last month. However, only 46% say business is the same or increasing compared to last year, down from 59% last month. Meantime, Purchasing finds only 47% of buyers calling themselves optimistic about the next six months, compared to 54% last month. Still, most of those who have changed their outlooks have simply shifted from optimistic to neutral. Only 15% of buyers are pessimistic about the coming six months, up just a point from one month ago.
Buyers remain most concerned about the latent effects of Asian and other world economic problems. One buyer in Washington says, "We have yet to feel the impact of the Japanese recession." Many buyers, however, see things as relatively stable. "We're in the middle of a long flat space," says a Pennsylvania buyer. Some metals buyers remain downright optimistic. "It's a great time to be a metals buyer," says an Oregon-based metals buyer. Regionally, survey data suggest that the Northeast is the most pessimistic region (only 48% in this region call themselves optimistic), while the Midwest is the most optimistic (64%).
Supply conditions
While buyers may be feeling more neutral about economic growth prospects this month, they say supply conditions continue to improve. Nationally, only 15% of buyers surveyed report any supply shortages, a decline of three points. Shortages continue to be most acute in the Mid-Atlantic states (36% report problems). Availability is easiest in South and Northeast, where just 9% and 7% report shortages of some type.
Most commodity buyers continue to experience favorable pricing conditions. According to this month's business survey data, the West/Pacific Northwest and Northeast regions are seeing the greatest frequencies of falling prices. The South is seeing the fewest occurrences of price erosion. Few commodities are experiencing upward price pressure this month. Reports from buyers indicate that transportation (with a diffusion index of 62) and MRO items (with a diffusion index of 57) are experiencing the greatest upward pressure. Steel and computers are experiencing the least upward price pressure. By region, here are some highlights:
* Northeast. Only transportation prices are trending upward in the Northeast (with an index of 60). Index tracking computer prices comes in at only 8, indicating severe price deflation. Regional index for industrial chemicals pricing is just 28 this month. Leadtimes are also tending to be stable or shorter in this region, with a few exceptions: Corrugated leadtimes are extending (diffusion index this month is 75). Easy availability characterized Northeast markets for aluminum (25) and copper/brass (33).
* Mid-Atlantic. Tags in the Mid-Atlantic states are trending higher for transportation, industrial machinery, and MRO items, according to this month's business survey. Pulp prices are showing the greatest inflation (with an index of 75). Buyers say leadtimes are generally shrinking for refined petroleum products (25), steel (27), copper & brass (25), and semiconductors (17). Leadtimes are stretching in general for paper (63) and MRO items (61).
* South. There is more price pressure to be found in the South, with transportation, MRO items, and industrial chemicals all trending up. Computers, however, are experiencing significant downward price pressure. Leadtimes in the South continue to shrink for most commodity items with the exceptions of transportation (57) and MRO items (51).
* Midwest. Prices in the Midwest are mostly trending down, with the exception of industrial machinery (56) and semiconductors (60). Computer prices are trending down the most--with an index of just 15. Leadtimes are a little tougher in the Midwest: copper & brass leads are stretching on average with an index of 64. Diffusion indexes tracking leadtimes for pulp, paper, plastic resins, office equipment, industrial machinery, and MRO items are all in positive territory.
* West/Pacific Northwest. Pulp prices are trending up on the West Coast (with an index of 60). Note, however, that the index tracking pulp leadtime activity shows big shrinkage (33) this month. Leadtimes are trending downward for all commodities in the region. Buyers in western states are experiencing generally inflating prices for industrial chemicals and MRO items (price diffusion index for both categories is 59 this month).
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