Price tags rise in some segments, fall in others
By Staff -- Purchasing, 9/2/1999
Business conditions remain healthy, according to Purchasing's August grassroots business survey of industrial buyers. Nationally, Purchasing's diffusion index tracking business conditions compared to the prior month registers at a robust 57.3. However, fewer than half of buyers surveyed in August (48.7%) say business is either equal to or stronger than August 1998. Business conditions appear best in the West/Pacific Northwest region, and toughest in the Midwest.The supply situation toughened up a bit between July and August. Nationally, 27% of buyers surveyed report supply shortages--up from 18% in July. Supply conditions are best in the South where only 15% report shortages and worst in the Northeast with 47% reporting some shortages of goods.
Survey results suggest that third-quarter 1999 may see a bit of inventory building, at all levels of processing. Nationally, the diffusion index tracking desired materials inventory-to-sales comes in at a negative 47.3, a near ten-point drop from the prior month. The West/Pacific Northwest has the highest index--68.2, the Mid-Atlantic region has the lowest--43.5. Diffusion index tracking desired work-in-progress inventory to sales comes in at just 45.2 nationally, down from 53.8. The South has the highest index--56.0, and the Mid-Atlantic the lowest--30.0. Meantime, the national diffusion index following desired finished goods inventory to sales is 44.9, down from 45.6.
Nationally, 49% of buyers are optimistic about business in the coming six months. In two regions, however, percentages are much higher--75% in the Northeast, 73% in the West/Pacific Northwest. Mid-Atlantic shows the fewest (47%) optimistic buyers. Nationally, 42% of buyers polled are neutral on six-month business expectations. Only 9% are pessimistic.
On prices, buyers report rising prices for several commodities. Nationally, the commodity price-trend diffusion index (percentage of buyers reporting stable to higher pricing) shows tags rising most rapidly for corrugated (66.4) and pulp (64.3). Not all tags are headed up, however. Nationally, buyers report negative monthly price trends for steel (44.8), copper & brass (44.2), and computers (43.6). Here's a look at price trends:
- Northeast: Inflation is nonexistent. Highest indexes are for pulp and corrugated paper (50), indicating that prices are mostly stable this month. Meantime, the survey detects falling prices for industrial chemicals (18.8), refined petroleum products (16.7), and semiconductors (20.0).
- Mid-Atlantic: Survey detects strong upward price trends for pulp (100% of buyers report increases), and packaging (ditto). Prices also trending up for corrugated (71.4), semiconductors (70.0), and steel (62.5). Prices in the Mid-Atlantic region continue to trend down for MRO items (27.8), refined petroleum products (33.3), and industrial machinery (also 33.3).
- South: Corrugated prices are gaining the most ground with an index of 77.8. Following close behind are paper prices (72.7), and refined petroleum products (70.0). Price tags are down for other items including copper & brass (11.1), computers (20.0), and office equipment (33.3).
- Midwest: All Midwest semiconductor buyers report rising prices. Other strong risers include pulp (87.5), corrugated (83.3), and plastic resins (80.0). Commodities showing negative price indexes include computers (12.5), aluminum and transportation services (both at 33.3), refined petroleum products, copper & brass (both at 40.0).
- West/Pacific Northwest: Buyers unanimously report rising pulp prices (100 index) for a second consecutive month. Also trending up are transportation costs (75.0), corrugated (70.8), and refined petroleum products (70.0). Trending down are computers (14.3), copper & brass (30.0), and aluminum (35.7).
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