Conditions are improving across the country
By Albert Genna and Albert Genna and Albert Genna and Albert Genna and Christina Pappas and Albert Genna and Albert Genna and Albert Genna and Anne Millen Porter -- Purchasing, 10/21/1999
Business conditions are improving slightly, according to results from Purchasing's September Grass Roots Business Survey of industrial buyers. Nationally, the index of buyers reporting business conditions as the same or better than last month rose to 59.7. The index of buyers comparing business to the same period last year also rose--up to 51.1 from last month's figure of 48.7. Business conditions appear best in the South and West/Pacific Northwest, with scores of 71.2 and 65.9 respectively. Buyers are least bullish in the Midwest (an index of 55.1), but that's still a 3.7 point rise compared with last month.Across the country materials seem to be in good supply. Nationally only 16% of buyers say they've seen supply shortages. Conditions are roughest in the Northeast (where 26% report shortages). The national supply shortage figure is down eleven points compared to last month. Conditions are best in the MidAtlantic, where only 12% report shortages, and in the Midwest, where the figure is 16%.
Nationally, the desired materials inventory to sales diffusion index comes in at 57.9--up over ten points compared with last month. The MidAtlantic has the highest index--70.4, and the South has the lowest--52.8. The national diffusion index of desired work-in-progress inventory to sales comes in at 53.4, up from 45.2. The diffusion index of finished goods inventory this month is 45.6 nationally, up from 44.9. The lowest index was seen in the South at 39.5. The Northeast has the highest at 54.6.
Overall, buyers remain optimistic about business conditions ahead. Nationally 55% of buyers surveyed think business will be better in six months' time. That's a rise of six points compared with last month. The figures are much higher in several regions--72% in the Northeast (down by 3 compared to last month), 71% in the West/Pacific Northwest (down by 2 points). Optimism is lowest in the Midwest, at 52%. Nationally, only 4% of buyers polled are pessimistic about the future.
Commodity pricing
Buyers are reporting prices going up for several commodities tracked in the survey. Nationally, the commodity price trend diffusion index (the percentage of buyers reporting stable to higher pricing) shows price tags going up fastest for corrugated (at 71.2, up from 66.4) and for MRO items (at 65.2). Not all tags are headed up, however. Buyers nationally report prices trending downward for steel (47.1), computers (45.8), and office equipment (28.6). Here's a look at what prices are trending significantly up or down in each region of the country:
c Northeast: Some prices are edging up, but most remain stable or declining. Corrugated paper rises to 73.6, up from 50, and pulp rises to 72.0--also up from 50 last month. But several are stable (including MRO items, industrial machinery, refined petroleum products and packaging--all at an index of 50). Smaller price increases are being experienced for paper, industrial chemicals, aluminum, and plastic resins. On the other end, prices for several commodities are shrinking. Transportation services rates an index of 41.7. Steel is at 43.8 and copper and brass at 40.0. The best buying conditions in the Northeast can be found for semiconductors (25.0), computers (30.0) and office equipment, where no buyers report rising prices.
- Mid Atlantic: Prices trending up even more than the Northeast. Pushing upward are paper (75.0), corrugated (73.3), semiconductors (66.7), MRO items (75.0) and transportation (83.3). Trending up--but less dramatically so--are packaging (58.3), pulp (58.0), industrial chemicals (54.0), plastic resins (57.0), and aluminum (52.3). But not all prices are going up. Commodities with prices trending downward include copper and brass (45.2), steel (33.8), refined petroleum products, computers and industrial machinery (all 33.3). The best conditions exist for office equipment (with an index of 16.7).
- South: Paper prices are in the worst position, trending up with an index of 90.0. Also trending up are industrial machinery (68.8) and plastic resins (66.7). Following close behind are paper and corrugated (both 62.5), industrial chemicals (56.0), and steel (53.0). But most prices in the South are stable or trending down. Semiconductors and MRO items are stable (both with indexes of 50.0). Trending down are packaging (41.7), aluminum and transportation (both 40.0), computers (37.5), and copper & brass (36.0). Pricing conditions are best in the South for office equipment (16.7) and refined petroleum products (for which no buyers report rising prices--resulting in an index of zero).
- Midwest: Buyers face a pulp pricing problem, with a price trend index of 92.0. Other prices trending up include corrugated (79.3), plastic resins (80.0), aluminum and MRO items (both 75.0), industrial chemicals (62.7), and copper & brass (61.4). Some prices are fairly stable, including steel (56.0), refined petroleum products, packaging, and transportation services (all at 50.0). Several prices show significant downward trends, including paper (34.5), industrial machinery (37.5), and office equipment and computers (both 0.0).
- West/Pacific Northwest: Pulp prices also are trending way up--at an index of 95.0. Plastic resins are also trending up (at 73.0), as are industrial machinery (60.0), corrugated (62.5), and industrial chemicals (59.3). Many prices in the west are hovering in the "stable" range, including steel (57.4), paper (54.0), and refined petroleum products, semiconductors, MRO items and transportation services (all at 50.0). Prices trending down include aluminum (45.0), packaging (42.6), copper & brass (36.3), and computers (30.0). The best pricing can be found for office equipment (with a low index of 16.7).
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