This release merits an D-
Source: National Association of Purchasing Managers.
Release Time: 10:00 ET on the third business day of the month for the
Raw Data Available At: http://www.napm.org.
The non-manufacturing NAPM report is a national survey of purchasing managers
which covers new orders, employment, inventories, supplier delivery times,
prices, backlog orders, export orders, and import orders. Diffusion indices are
produced for each of these categories, with a reading over 50% indicating
expansion relative to the prior month, and a sub-50% reading indicating
The index should be far more indicative of the broader economy given its
inclusion of service-producing as well as good-producing sectors outside of
manufacturing. However, the short history of the index dates to only July 1997
and doesn't provide the insight of a longer period inclusive of varied economic
climates. The seasonal adjustment of the index didn't begin until January 2001
with only 3 of the 9 components seasonally adjusted as of April 2001. The lack
of historical data and lack of a tight correlation to the non-manufacturing
economy leaves the relatively poor "D" rating compared to the "A-" rating of the
well-respected manufacturing NAPM index.
The Non-Manufacturing NAPM Report on Business is a newcomer not yet closely
followed by the private sector.
Who and What It Surveys
The Non-Manufacturing NAPM index (sometimes refered to as the NAPM Service
index) is the result of a monthly survey of over 370 companies. The survey
queries respondents on a number of monthly indicators, including orders,
employment, inventories, supplier delivery times, prices paid, order backlogs,
export orders, and import orders. Respondents are asked to characterize each
indicator as higher, lower, or unchanged for the month (or faster/slower in the
case of delivery times). They are not asked for specific numbers - only a thumbs
up or down.
Presenting the Numbers
Based on these responses, the NAPM calculates diffusion indices for each of
the components. These diffusion indices are calculated by adding the half of the
percentage of respondents answering "unchanged" to the full percentage answering
"higher" (or "slower" for deliveries). These diffusion indices do not yield
estimates of specific magnitudes of strength or weakness, but the more
respondents who are indicating trends in the same direction - the better the
chance that the magnitude of that move is larger.
A diffusion index of 50% is the theoretical breakeven mark - with readings
above indicating strength and below indicating weakness. The total index is
seasonally adjusted but only 3 of the 9 components are currently adjusted for
The total index is the result of a separate question regarding general
business conditions (unlike the Manufacturing NAPM which is calculated from some
of the components). The business index is calculated using the same diffusion
calculation used in the components then adjusted for seasonality.