Component Buyers Cite Growing Optimism

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.

Component Buyers Cite Growing Optimism

After slowing in July, the Global Purchasing Index rises more than 2 points in August, as buyers of electronic components point to better business conditions.

Global Purchasing’s monthly business confidence index rose 2.3% in August to 116.9, indicating continued optimism among purchasing managers and other buyers of electronic components. The August level approaches June’s record high of 117.5 and represents an increase over July’s slight dip to 115.5. The GPI has remained above the 100-point threshold indicating optimism since its launch in January and has maintained a steady surge throughout the summer.

Overall, buyers reported a drop in new orders from customers, steady lead times, and an increase in their component inventories. Buyers also reported an increase in their purchasing activity, and said they generally are paying higher prices for components.

The GPI’s new orders index fell 9% in August to 2.03, matching a record low established in June. Component inventories rose 2.3% to 2.21, the highest level since January. At the same time, buyers said their purchasing activity increased during the month (6% compared to July), and that the prices they pay for those components are higher compared to July. The prices index rose 7.5% over July to 2.27.

GPI panel members surveyed for the month pointed to seasonal demand and generally improving economic conditions as reasons for growth.

“After several months of flat sales we experienced the largest single-month growth in recent years,” one panelist said. “We attribute the uptick to a variety of circumstances, including seasonal demand and industry factors as well as our internal marketing methodology evolution. We have scheduled orders this month into Q1 of 2015.”

The news comes on the heels of a positive report from the Institute for Supply Management earlier this week. ISM’s August Report on Business, which measures business sentiment among manufacturing supply chain professionals nationwide, surged to its highest level in more than three years in August, as its Purchasing Managers Index registered 59. The report also revealed a jump in new orders, as its new orders index increased more than 3% to 66.7, its highest level since April 2004.

“With the decrease in military contract awards, the component distributors appear to be more price conscience and competitive,” one panel member reported.

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