Purchasing Execs Maintain Positive Outlook

A monthly benchmark that gauges purchasing professionals’ views on procurement activity in the electronic components marketplace. A reading below 100 indicates pessimism; a reading above 100 indicates optimism.

Purchasing Execs Maintain Positive Outlook

GPI dips slightly in November but remains in positive territory, as purchasing professionals point to steady lead times, higher prices during the month.

The Global Purchasing Index fell in November, but remained well above the 100-point mark indicating economic optimism among purchasing professionals nationwide. The index registered nearly 122 during the month compared to a reading of nearly 123 in October. A reading above 100 indicates optimism among purchasing managers; a reading below 100 indicates pessimism.

Conducted monthly, Global Purchasing’s GPI surveys a panel of 100 purchasing managers to gauge their business outlook, asking questions about pricing, inventories, lead times, purchasing trends, and customer orders. In November, panel members reported a decrease in customer orders, an increase in inventory levels, and noted that lead times remained steady during the month. They also said they made fewer purchases in November and that they paid higher prices for electronic components compared to October.

In general, panel members pointed to a winding down of 2014 and an anticipated uptick in the New Year.

“Business has been typically flat due to falloff of seasonal demand and Q4 asset reduction,” one panel member said. “Schedules for Q1 2015 are up.”

New Orders, Inventories Up

Purchasing managers reported receiving fewer orders from customers compared to October, with the new orders index falling about 1% to a reading of 2.23. Despite the decline, the new orders index remains strong after jumping 10% in September and increasing slightly in October. Inventories continued to climb following a considerable drop earlier in the fall. In September, the GPI inventories index fell 7%, indicating companies had fewer supplies on hand. The inventories index shot back up in October, rising 7% to 2.2 and increasing slightly this month, to 2.23.

Panel members also reported a decline in their purchasing activity during the month, as the new purchases index fell 3% to 2.21. At the same time, the prices index rose 1%, indicating that purchasing managers paid higher prices for electronic components in November. Lead times remained steady, as the lead times index maintained its 2.3 level from October to November.

“There are usually one or two components that have long lead times (8-12 weeks),” said one panel member, “but in general the lead times are the same.” 

The report echoes similar sentiment from the larger manufacturing community, as the Institute for Supply Management’s Purchasing Manager’s Index (PMI) remained in positive territory in November as well. In its November Report on Business, ISM reported a 0.3% dip in the PMI compared to October, but noted that it remained above the 50-point mark indicating expansion, at a reading of 58.7%. ISM said the manufacturing economy expanded for the 18th straight month and that the overall economy grew for the 66th straight month.

Industry reports from earlier this fall point to ongoing positive conditions as well. Manufacturing consortium Prime Advantage released results of a purchasing and manufacturing survey that indicated growing revenues among manufacturing companies and an increase in hiring in the New Year. Forty-nine percent of the survey respondents said they expected to see revenues increase in the second half of 2014, and 50% reported that they expect to hire more staff in the next six months, with just 1% predicting layoffs.

Global Purchasing’s GPI measures purchasing professionals’ business confidence in five areas: new orders from customers; electronic component inventory levels; purchasing activity; pricing; and lead times. Global Purchasing compiles the GPI data monthly from a survey of more than 100 panel members who buy a wide range of electronic components. Prequalified for their industry experience, panel members are purchasing executives, managers, or buyers at original equipment manufacturing (OEM) or contract manufacturing firms around the world.

Source: globalpurchasing.com