Purchasing Agents See Brisk Growth : Survey Shows Sharp Rise in New Orders, Improved Production

The economy began the new year growing briskly after a downward drift at the end of 1984, according to the National Assn. of Purchasing Management’s monthly survey released Sunday.

New orders were up sharply in January after a months-long “negative trend,” and production improved after slipping into a decline in December, the group said.

Other good signs were that vendor deliveries slowed slightly and employment improved, it said. In addition, inventory levels increased from year-end lows.

Price Decreases Noted

The purchasing managers surveyed also reported more price decreases than increases, for the second consecutive month. And, in answer to a special question, 39% of the purchasers indicated that overall price increases for the first quarter were lower than originally budgeted, compared to only 5% who said they were higher.

“The economy has entered 1985 strongly. The danger signals we were seeing during the last quarter seem to have faded,” said Robert J. Bretz, chairman of the group’s business survey committee and director of corporate purchasing at Pitney Bowes Inc.

The purchasing managers’ composite index increased to 52.5% in January from 50.9% in December. The index was at 51.4% in November, the group said.

A reading below 50% indicates that the economy is in a declining phase; above 50%, that the economy is expanding.

250 Firms Queried

The group surveys the purchasing managers of 250 industrial companies.

After the sharpest decline in six months in December, new orders snapped back dramatically in January, the group said.

Members reporting improved new orders increased to 25%, the highest since 37% in June and compared with only 19% in December, it said.

Production, which dropped in December to climax a five-month decline, increased sharply last month. The 27% reporting better production in January was the highest since 35% in June and represents a 15-point margin over the 12% reporting worse production.

Vendor deliveries slowed somewhat in January as purchasers reported catching vendors with their inventories down at the end of the year and struggling to meet the increased demand in January.

Employment Rises

The rate of employment improved slightly in January, after five consecutive months of decline. Those reporting same or greater employment rose to 79% from 77% in December. However, many continued to report numerous belt-tightening measures resulting in selective layoffs, either current or planned within the next month or two.

Purchasers reported increasing inventories in January after numerous reductions in December to keep year-end inventories low.

Seventy-two percent reported the same or higher inventories compared to 68 in December, the group said.

More purchasing managers reported price decreases, 21%, than increases, 13%. That was the highest since 23% in January, 1983.

For all categories of purchases, lead times widened slightly in January, reflecting the strengthening of the economy, the group said.

The association is based in Oradell, N.J. It released a copy of its report here.