Buyers report sluggish business conditions for April, but like the month before, a silver lining emerges for many responding to Purchasing Magazine's latest monthly business survey. Eighty-three percent of respondents are either optimistic or neutral about the business outlook for the next six months (40% are optimistic, 43% neutral) while only 17% report a pessimistic view of the future.

A purchasing manager from Spartanburg, S.C., says, "We don't think the economy is in trouble, this is merely an adjustment for excessive growth in the past few years. We are experiencing a strong first quarter." An optimistic purchasing manager from Geneva, Ill., adds, "It appears we have hit the bottom. We have adjusted for lower overall sales from last year, but can still be profitable if we do the right things. We have nowhere to go but up."

Buyer sentiments in Purchasing's monthly survey are bolstered by hard economics news:

• The unemployment rate was little changed at 4.3% in March according to the U.S. Bureau of Labor Statistics.
• People might be fearing layoffs, but the reality is that Americans have as much money as they did last month. The Federal Reserve Board notes that consumer spending rose slightly in most districts in January and February as retailers continued to offer deep discounts on winter merchandise.
• Auto sales are surprisingly strong. Numbers released last month show that cars are selling at an annual pace of 17.1 million vehicles. The industry views sales of 16 million as a good year.
• According to data from the Association of American Railroads, U.S. carload traffic rose 0.7% in March compared to March of last year.

Although still low, the diffusion index for month-to-month business conditions rose a full point from 42.5 in March to 43.5 in April, a second consecutive monthly gain indicating the economy may have hit bottom in the early weeks of 2001.

There is also evidence that materials stockpiles, in relation to sales, are starting to fall, especially in the automotive and nondurable goods sectors. Purchasing's April grassroots business survey places the percentage of buyers reporting excessive inventories plus half the percentage reporting acceptable materials stock levels at 71.7 compared to 74.7 in March.

Excessive inventories are definitely a problem in the current slowdown, but anecdotal evidence suggests that inventory swings will not depress the economy the way they have in past downturns. Deployment of new supply chain software coupled with Internet-based communications between buyers and suppliers have kept electronics inventories at much lower levels than in previous downturns. That view was expressed by both Roger Whittier, director of purchasing at Intel, and Andrew Gort, executive vice president of global supply chain management at Celestica, at last month's meeting of Purchasing's Editorial Advisory Board.

Here are the price and leadtimes trend details by commodity segment—

Paper and corrugated: Latest survey places diffusion indexes tracking pricing trends for paper and corrugated at, respectively, 56.9 and 58.0, which means most buyers are experiencing stable pricing while a few are still working to beat back sellers' increase attempts. The key for buyers: Pulp pricing is losing ground fast (Purchasing's diffusion index for April plunged to just 28.6), and paper/corrugated prices usually follow suit. Paper leadtimes also appear to be shrinking: The diffusion index tracking average delivery speeds dipped below 50 and a purchasing director from Carol Stream, Ill., reports that leads for all paper grades dropped from 3-4 to 2-3 weeks.

Industrial chemicals: Buyers say chemical pricing conditions in April were very much the same as they were in March (the diffusion price index fell slightly from 78.6 to 73.4, but remained strongly positive). Behind the national number, however, buyers say the picture is more mixed: Producers are announcing price increases in some markets, taking a beating in others.

Refined petroleum products: The diffusion index for petroleum pricing dropped nearly 15 points in April to 73.7, but remains well in excess of neutral threshold (50). Buyers say fuel-related surcharges remain the norm and are creeping into more sectors as natural gas and electricity supply problems continue.

Steel: Pricing for steel is hitting 20-year lows. The latest round of mill price hikes didn't stick because of excess supply and slowing demand. Third lowest among commodity segments this month, Purchasing's diffusion index for steel pricing is a paltry 38.9.

Copper and brass: The April diffusion index for copper and brass pricing is 52.3, down from 57.9 in March. Although copper nickel tubing orders from shipyards seem to be on the rise, overall demand softened in April and copper prices were down by 2%-3%.

Semiconductors: Diffusion index tracking semiconductor pricing nationwide bounced back to neutral (50.0) in April (from a negative 44.4 in March), but this apparent stability belies large regional disparity. Some Southern buyers report price erosion while a group of mid-Atlantic-based buyers say chip prices headed up last month.

Computers: Second lowest among commodities, the diffusion index for computer pricing posts at 34.8 in April, a gain from 28.2 in March, but still indicative of major price-cutting wars among sellers. Some interesting supply-side developments: Flash memory prices fell sharply in the first quarter. Contract prices for 16-Mb flash chips fell 35%-40% in first quarter because of a large inventory of parts caused by weak end-equipment demand. Flash chips are used in cell phones, networking equipment and in PCs. Cell phone shipments have slowed down. Outlook: Buyers can expect flash tags to fall 5%-7% for the year.

MRO: At 58.7, the diffusion index for MRO pricing is down slightly from month ago, but still indicates modest inflation on maintenance goods. It appears that MRO distributors may be reacting to the economic slowdown by cutting back on their normal stocking levels. While leadtimes for most commodity raw materials are shrinking, a separate survey of buyers finds generally stretching leadtimes for a market basket of 22 common MRO items. In fact, the annual rate of change for Purchasing's composite MRO index hit +6.1 in March compared to a bottom of -11% back in January of 2000. A contributing factor: Manufacturing companies that had deferred maintenance during the recently ended economic boom may be taking advantage of the slowdown to service machinery, pushing up demand levels, and prices, for certain spare parts.

Packaging: Price trend diffusion index for packaging rose nearly five points in April to 70.3, indicating still-strong upward pricing pressure. Many buyers report that foam increases as high as 12% are the major driving force.

Transportation: While still high at 70.0, the diffusion index tracking freight rates fell 10 points between March and April, as a majority of buyers (54%) report stable transportation costs for the month.