Purchasing Managers’ Confidence Jumps in June

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 Managers’ Confidence Jumps in June

Global Purchasing Index rises 5% in June to 117, its highest reading since January

Following three months of declines, the Global Purchasing Index rallied in June, rising nearly 5% to 117.5, its highest level since Global Purchasing launched the index in January. The GPI measures purchasing managers’ business confidence monthly.

The GPI has remained above the 100-point mark indicating optimism since January, but had fallen in March, April, and May after hitting 116 in February. May marked the lowest reading to date, at 111.9. June’s 5% climb to 117.5 indicates a growing sense of optimism among purchasing executives as summer began. GPI panelists pointed to an increase in new orders and in their own electronic component purchases during the month, but also noted that inventories increased and product lead times had lengthened in June as well. Pricing remained stable during the month, according to panelists.

For some purchasing executives, the increased optimism reflects their companies’ successful strategies for finding new business.

"The current flat trend has compelled us to create new channels for business, both through marketing and diversity …," according to one panelist. "Our focus now is on creating new markets and enabling them to find us. We have already seen a 25% increase in organic traffic to our Web properties."

New Orders Climb, Purchases Hit All-Time High

The June New Orders Index rose x% to 2.09, its highest point in three months. Despite the increase, the new orders index remains well below where it started in 2014—the index registered 2.22 in January and slipped roughly 2% each month through April, seeing its largest decline of nearly 4% in May.

Looking at panelists’ purchasing trends, June’s reading of 2.15 continues an upward climb that began in May, when panelists said they increased their purchase of electronic components by 9% over April. Purchases hit a high mark of 2.21 in February.

Inventories Rise, Lead Times Lengthen

GPI panelists reported higher inventory levels in June, as the index rose nearly 2% to 2.15. This marks a continued upward trend in inventory since April, when the index slid to 2.06 from a high of 2.17 in March.

Lead times continued to lengthen in June, seeing their largest increase since January. Lead times rose 8.5% during the month to hit a six-month high of 2.43. Lead times have been increasing since January, according to GPI panel members—some of whom point to limited flexibility in capacity among some component manufacturers.

“[We] are now seeing a few more manufacturers’ lead times beginning to extend,” according to one panel member. “Capacity is not as flexible (for expansion) as it would have been 3-4 years ago.”

“Various manufacturers are increasing lead times by 2 to 2.5 times for certain devices,” another panelist commented.

Pricing Remains Stable

The prices purchasing managers are paying for electronic components remained stable in June, as the index registered 2.06 for a second straight month. Prices hit a six-month high in April, when the index measured 2.15, and have remained below January-April levels for the past two months.

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