Manufacturing drops accelerate during July

Staff -- Home Textiles Today, 8/13/2001 12:00:00 AM

TEMPE, AZ —

While the nation's overall economy grew slightly during July, the manufacturing sector continued its year-long decline, with production, new orders, inventories and employment rapidly declining during the month, according to a widely watched monthly update from the nation's purchasing managers.

The key NAPM (National Association of Purchasing Management) Index declined last month by 110 basis points to a level of 43.6 percent, signaling continuing weakness in manufacturing activity — a familiar refrain for home fashions producers, whose business continues to soften.

"The manufacturing sector continued to decline in July as has been the trend since August 2000," said Norbert Ore, chairman of the NAPM's Business Survey Committee. "The rate of decline accelerated during the month as new orders softened somewhat from June and inventory liquidation accelerated. Manufacturers continue to reduce payrolls and capital expenditures in cost-cutting efforts."

In something of a mixed blessing, he noted, "most manufacturers are enjoying lower raw material costs." But that also signals "deteriorating pricing power for their finished goods."

"The overall picture is one of continued decline in manufacturing activity during the month of July," said Ore. "The manufacturing sector is in its 12th month of decline and appears to continue to lack drivers that will stimulate recovery."

Though this month's report indicates energy prices are higher, the major commodities — natural gas, gasoline and diesel — all indicate lower prices, and this should ease cost pressures," said Ore.

And a continued victim of the slowdown is capital spending for plant modernization. "Manufacturers continue to back off from major capital investments as capital expenditures again hit a low for the history of the index," he said.

July's index reading indicates "a faster rate of decline," compared to the June reading of 44.7 percent, said NAPM. "This is the 12th consecutive month that the manufacturing sector has failed to grow." A reading beneath 50 percent indicates that the manufacturing sector is generally contracting.

Suggesting continued weakness going forward, the NAPM's New Orders Index declined by 230 basis points to a level of 46.3 percent, down from 48.6 percent in June. In a hopeful sign for this industry, textiles was one of only six industries reporting a higher rate of increase in new orders.

Looking to lighten up on debt and interest expense, suppliers continue to work down stockpiles. "The rate of liquidation of manufacturers' inventories accelerated in July as the Inventories Index registered 35.8 percent, down from the 40.8 percent reported in June," said the purchasing managers' trade group. "The Inventories Index has been under 50 percent for 18 consecutive months."