Buyers of electronic components remain generally optimistic about business conditions, as May’s Global Purchasing Index inched up slightly following a 12% drop in confidence in April. Despite the slowing confidence, the GPI has remained in positive territory since the beginning of the year, with a high reading of 124.4 and a low of 109.3. A reading above 100 indicates optimism among buyers of electronic components, while a reading below 100 indicates pessimism.
May’s GPI rose nearly 2% over April to reach 109.5. Buyers indicated that they received slightly fewer orders from customers during the month; they also reported having less inventory on hand while increasing purchases from their suppliers marginally. This is the second month that buyers’ optimism remained on the lower end of the scale since the GPI launched in January 2014. The index had remained above 110 until this April, except for dipping below 100 in December 2014.
The new orders index fell 7% to a reading of 2, indicating that customer orders remained flat during the month. Buyers reported lower inventory levels, as the inventories index dropped 4% to 1.95; this was the lowest inventories reading since December 2014, when the index registered 1.86. A reading below 2 indicates that buyers have less inventory on hand.
Buyers said they purchased slightly more electronic components during the month, as the purchases index rose half a percentage point to 2.08. The purchases index had surged in January after a dismal December and continued to climb through March before falling 21% in April.
Prices Rise, Lead Times Lengthen
Buyers reported paying higher prices in May, as the GPI prices index surged 10% to a reading of 2.24, its highest level since the GPI was launched in January 2014. A reading greater than 2 indicates that buyers are paying higher prices. In addition, most buyers reported longer lead times for many of the components they purchase, as the lead times index rose 1% to 2.21. A reading above 2 indicates a lengthening of lead times.
Although buyers remain optimistic about industry business conditions, many expressed ongoing concern about the uncertainty of the economy and a general slowdown across the industry.
“[We’re] having a hard time getting forecast information from sales through the end of the year,” said one GPI panel member. “Their feedback from customers is non-committal.”
“[We’re experiencing] longer delays on specific parts only; the manufacturer can’t respond quickly to demands,” said another panel member.
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 or contract manufacturing firms around the world.