The National Association of Purchasing Management Houston Inc.,

Houston's PMI (Purchasing Manager's Index) slipped significantly in April, reflecting the largest one month decline since last October, the month following the September 11th tragedy. The PMI for the month was 46.3, down from the 48.6 recorded in March. If the April fall is only a hiccup on the road to positive growth the patient needs substantial assurance that full recovery is closer than the current measurement would seem to indicate. Coincidently (?) the national PMI also fell noticeably in the past month, implying that there is still considerable softness inside the general movement toward recovery on the national level. It would appear likely that the forecasted improvement, both nationally and here in Houston, may be fraught with chuckholes on the road back to economic growth.

The Purchases component of the PMI, which has been falling for eight consecutive months, accelerated its loss in April as nearly half of survey contributors reported buying fewer goods and services for their firms than they purchased in March.

The Sales and Production segments of the Houston PMI both took lumps in April according to Houston's purchasing execs. Both Sales and Production indices

hastened the losses they have been reflecting for the past seven consecutive months, with the Sales index dropping from -2 in March to -22 in April. Nearly twice as many survey contributors reported Sales declines in the past month as similarly reported one month ago.

Employment slowed its fall in April from -23 to -15, and two-thirds of survey respondents reported no job losses or gains in their organizations for the month. Employment has been in general contraction in Houston for seven consecutive months, with a relatively steady rate of decline but with all activity confined to a narrow percentage of those reporting.

Lead Times got slightly longer in April, at least somewhat indicative of fewer finished goods on suppliers' shelves.

Prices Paid remained nearly flat for the 4th consecutive month and are not at present a factor in determining a direction for the near future.

The path to recovery remains hazardous and tentative and calls for a strengthening national economy and a more stable international scene.

Items in short supply: Castings, bearings, electrical cable, electric winches, winch components, custom suture, vaccines, electronic components, valves, actuators, specialty pumps, small tugs (400HP & 600HP), homo polymer.

Prices on the UP side: Ball bearings, small tooling for manufacturing, petroleum products, extrusions of PVC tubing, insurance coverage, structural steel tube, steel plate, bar stock, vaccines, compressors, items made from CS plate, travel management services, environmental clean-up costs, polycarbonate, PVC.

Prices on the DOWN side: Paper good products, titanium, MRO items, electric winches, computer components, paper products, electrical components.

COMMENTS FROM SURVEY PARTICIPANTS

"Showing some increase in orders; we are back to a 40 hr week."

"Profits are down and 3 more companies have become major competition."

"We have just completed a re-alignment of our operating regions in which our department lost 2 employees."

"The amount we receive for surplus and structural pipe is down."

"Power business leveling off; upstream opportunities increasing; strategic sourcing initiative beginning to pay dividends."

"My advice to anyone new in the business is to watch the markets carefully; there are some extraordinary opportunities developing."

"Things are still very slow."

"No change from last month. Overall, business still below forecast."

"New accounting rules have everyone re-stating profits & losses. This new honesty is being felt by all of us. Business is steady, but could be better. Backlog is down."

"Hiring has tapered off. Budget variances are reported to VP's to justify overages in budget."

"All our prices are on the up side."

"We are starting e-commerce (business to business) with 4 vendors. It will be interesting until all the kinks are worked out. We let over 70 temporaries go last month and now the board is full of new jobs. It's different however, mostly service support overseas."

"Incoming orders seem to be on the upswing."

"Our business related to drilling activity has dropped significantly. Major projects are taking longer getting off the drawing board and being released to purchase by the customers. Consequently, our business activity for April/May is not as strong as March was."

"Have many machine shops begging for work."

"Layoff in the oil patch."

"Shipping a lot of product but orders and backlog are down. Taking a lot out of inventory."

"Good people are still hard to find."

"Things (business) are slowly beginning to improve."

"Drilling activity remains slow, however, forecast for 2nd qtr looks favorable."

"Business is down significantly. Smallest backlog in 18 months."

"Re-structure back on hold as well as new hires. We have to be way over budget."

"Lots of RFQ's, however, they haven't turned into orders. Slow, slow, slow. Eating into our backlog at an alarming rate."

"Material and finished goods are no longer in short supply and have leveled off and are getting to a point, the supply has gotten better."

"Very slow, not much backlog. Hanging on."

"Steel tariffs have already affected domestic steel prices, and there is growing concern about their affect on steel fabrications and related products. We are looking for signs that other commodities will be affected if tariff retribution occurs."

(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
May 10, 2002	by Douglas R. Miller, C.P.M.	713-988-7306
	Copyright 2002 by NAPM-Houston, Inc. All Rights Reserved