The National Association of Purchasing Management Houston Inc.,

Houston's PMI (Purchasing Manager's Index) showed almost no movement in the month of March after improving in February. March's PMI is 48.6, just slightly up from last month. The Houston economy bottomed out at 46.1 in December, a relatively modest low point, and has steadily risen to its current mark over the past three months. Although the PMI is still shy of the breakeven point (50) it is still showing signs that slow improvement is yet to develop further.

The Sales index for March fell to -2 from 00 in February, indicating that 2% more firms reported decreased sales activity in the past month than experienced sales
increases.

Production also slipped slightly into negative territory after just barely reaching a positive plateau in February.

The Employment component of the PMI took a substantial hit in March with 28% of Houston's purchasing execs reporting that employment numbers contracted in their firms over the past month, while only five per cent reported increased manpower levels. The March employment index places that component

back where it was reported during the November through January period. The Employment index has now been in solidly negative territory for six consecutive months. There is not, at this point, a clear trend for Employment numbers. Sales and Production indices will have to show a steady upward track for Employment to gain any positive motivation.

Purchases slowed its 7 month decline significantly in March, with the index reported at -7, compared to -33 in February, and after 4 consecutive months of -20 or worse. Clearly, there is at least some pent-up need to replenish inventories that have been drawn down continuously for over three-and-a-half years, and increasing purchases, perhaps substantially, has not been unexpected. If this is beginning to occur, the movement will feed on itself and increase production at the raw material, semi-finished, and finished good levels almost simultaneously, stimulating many segments of Houston's economy.

As the national economy continues to improve, barring any unforeseen roadblocks, Houston should also continue to see moderate growth over the next several months.

Items in short supply: Electrical wire, custom suture, micro processors, relays, specialty pumps, castings, breakers from outside the U.S., machined electronic components, specialty connectors.

Prices on the UP side: Plastic extrusions, pouches & bags, bearings, tooling, steel pipe, iron castings, vaccines, engines, transmissions, triplex pumps, bearings, oil seals, hydro-electric valves, electronic/electrical components, fittings, rubber hose, MRO supplies, C.S. sheet & plate, pharmaceuticals, diesel fuel, petroleum (gas/oil) products, freight, fuel surcharge, homo polymer resin, steel, PVE, PP, class 8 truck chassis, steel imports.

Prices on the DOWN side: Stainless steel, bronze/worm gears, worm shafts, gear boxes, swing boxes, office supplies, computer components, cartons, paper products, surplus structural pipe, MRO items, PC's and peripherals, copper wire, boxes, polycarbonate, PCBA's.

COMMENTS FROM SURVEY PARTICIPANTS

"Steel bar is more difficult to come by, which is okay when business is off, however this is temporary."

"Manufacturing still slow, working 32 hour weeks, starting to see some sales, need more sales to get back to normal."

"Sales same, building stock (FGI). Hoping the bottom is here."

"Business is steady but not as good as last year. We are ready to work. Hope the economy and consumer confidence continues to improve."

"We are fortunate, our business has not fallen off at all. Look for a good year!"

"We are seeing normal yearly 3% increase on some special bearings and oil seals."

"Oil patch business continues to be slow. Another round of no new orders, reduce inventories, stretch out deliveries and price reductions - for the Bottom Line."

"Approximately 20% cut in workforce. Reorganizing again. 'Ford has a better idea.' I wish they would share it with upper management. I've had better months."

"We are very busy making shipments due to end of quarter emphasis. Business for April/May time frame is not very strong."

"Resin based products, poly, announced increases, but my agreements will keep pricing flat through 2nd quarter."

"Our international volume has been down significantly since 9/11."

"One of our business units is being sold, remainder will be re-organized. Interesting times."

"Beginning to feel the effects of softening in the market. Good shipments, but chewing up the backlog."

"Operating budget has been cut as a cost savings initiative."

"Many manufacturers are trying to get the prices higher - resistance does work."

"Salesmen are beginning to get more active…sure sign economy's slowed…they have to get out and start selling."

"The rise in natural gas prices in mid March is a positive indicator for the end of the 1st Q. Drilling activity is picking up slowly & as planned."

"Still waiting to re-structure our department. The stress level is unbelievable. This will be great if it ever happens!

"Business is picking up. We seem to see a light at the end of the tunnel."

"Homo polymer resin is rising at 7.2% for March. Announced 7% rises in price each month through June. This resin is tied closely to PVC pipe. This would indicate expected increase in construction nationwide from now through August."

"Continued focus on low cost country sourcing has driven domestic pricing down, but new steel tariffs will cause a re-evaluation of this strategy in some areas."

" We're going through a period where most things are slowing way down for us."

"Engine and transmission deliveries-lead time going out, large portion of division up for sale. Re-organizing, reducing inventory, oil services companies in watch and wait mode, poised for activity."

"Market share has decreased - FDA audit expected - ISO audit due in April."

"Concern (about) cost impact of new import tariffs."

(Note: Each monthly index was calculated by subtracting the "DOWN" percentage from the "UP" percentage. The indices are not seasonally adjusted.)

A reading above 50 indicates that the Houston economy is generally expanding; a reading below 50 indicates that it is generally contracting.

	NAPM - HOUSTON BUSINESS REPORT
April 10, 2002	by Douglas R. Miller, C.P.M.	713-988-7306
	Copyright 2002 by NAPM-Houston, Inc. All Rights Reserved