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NAW VICE PRESIDENT ISSUES REACTION TO JANUARY PRODUCER PRICE INDEX FIGURES

 NAW VICE PRESIDENT ISSUES REACTION
 TO JANUARY PRODUCER PRICE INDEX FIGURES
 WASHINGTON, Feb. 14 /PRNewswire/ -- Ron Schreibman, vice president of the National Association of Wholesaler-Distributors (NAW), issued the following in response to today's release of January Producer Price Index (PPI) figures by the Bureau of Labor Statistics (BLS), Department of Labor (DOL):
 Producer-level inflation continues to be held in check by the weak economy. Looking ahead, inflation should remain relatively tame due to declines in crude and intermediate producer prices.
 The producer price figures, combined with poor industrial production and capacity utilization reports, mean there's room for further interest rate easing by the Fed. In a weak economy like this one, low inflation is critical to recovery because it makes it possible to attack the weakness with monetary policy and gradually drive it out.
 The reported increase in wholesaler-distributors' December inventories reflect two things. On the upside, there's a building of stocks in anticipation of increased future business activity. On the downside, the increase reflects an inability to move products downstream due to lack of demand.
 Improvements in consumer and business confidence are critical to an economic recovery. Our latest survey of 267 wholesale distribution company chief executives indicates a modest upturn in confidence, from 87.4 to 88.4, the first such increase since the fourth quarter of 1990.
 The Producer Price Index is an index of prices at which wholesaler-distributors buy from their suppliers. Inventories account for approximately 40 percent of wholesaler-distributors' assets.
 NAW is a federation of 114 national commodity line associations representing more than 40,000 firms in the wholesale distribution industry.
 WHOLESALE DISTRIBUTION INDUSTRY CONFIDENCE INCREASES
 FOR FIRST QUARTER 1992; INDEX MOVES UP 1 PERCENT TO 88.4
 Driven by the forecast that net sales and net income in the first quarter of 1992 will increase compared to the same period in 1991, wholesaler-distributors confidence has increased, according to data released today by the Washington-based National Association of Wholesaler-Distributors (NAW).
 The first quarter 1992 prediction, combined with actual fourth quarter 1991 results, resulted in a confidence index increase from 87.4 to 88.4. The index operates on a base of 100, recorded in the fourth quarter of 1989.
 The survey, conducted for NAW by the international accounting firm Arthur Andersen, included merchant wholesale distribution companies selling a broad array of durable and non-durable goods to retailers, industry, institutions and government. Merchant wholesale distribution employs nearly 5 million workers and is a $1.8 trillion per year industry, according to the U.S. Commerce Department. The latest data are based on survey responses from 267 merchant wholesale distribution firms. The survey was conducted in late January. The National Association of Wholesaler-Distributors (NAW) and Arthur Andersen have tracked industry confidence since 1989.
 According to Jerry Harris, VWR Corporation, Philadelphia: "At this time last year, the marketplace was heading down ... fast. Our reading of the market in late 1991 and early 1992 is that we are flat ... with some early signs that there is a light at the end of the tunnel."
 The survey results indicate that wholesaler-distributors of durable goods such as equipment parts and hardware have been hit harder by the recession than those wholesaler-distributors of non- durable goods such as food and beverages. This can be attributed in part to the decline in the construction market and the fact that durable goods distributors' customers can more easily defer purchases in a period of recession.
 According to Patrick W. Dolan, partner in charge of Arthur Andersen's world-wide wholesale distribution practice: "Wholesaler- distributors, generally speaking, have really tightened their belts. But more cost control is needed because companies' gross margins are continuing to decline even as sales and net income are increasing.
 "Some wholesalers have 're-engineered' their processes and paper flows in order to gain efficiencies and better customer service. These are valid steps. What we won't know until mid-year is whether the industry's optimism is well-founded or merely wishful thinking," noted Dolan.
 George Hayden, president of C.W. Hayden Co. Inc., Auburn, Maine, had this view on how the sluggish economy has affected the wholesale distribution industry: "We feel that once this recession is corrected, most companies will have streamlined their operations so that as the economy rebounds, their facilities will be more efficient. Hopefully this will create a cycle of more efficient operations, more efficient product at a better price, resulting in more orders."
 According to Leslie Smith, president of The C.D. Smith Co., Grand Junction, Colo., "If we can hang on now -- and we intend to -- there is a future, although we need to change our primary focus and become aggressive in new product and new customer generation."
 Wholesale distribution companies are in a unique position in the economic channel, dealing extensively with both manufacturers as suppliers, and retailers and industrial concerns as customers. As such, wholesaler-distributors are exposed to market information which makes them particularly sensitive to changes in near-term business conditions and confidence.
 Survey respondents were asked to supply 1991 fourth quarter actual data and 1992 first quarter estimates for eight measures of company activity: net sales, gross margin percent, net income, inventory, employment, capital spending, incoming orders and days sales outstanding. In both cases, respondents were asked to compare the actual or estimated data to the comparable quarter last year.
 NAW is a Washington-based trade association representing the nation's merchant wholesale distribution firms. Its members distribute virtually all durable and non-durable products purchased by retailers and industrial customers.
 Arthur Andersen, S.C., is an international accounting, audit, tax and management information consulting firm. Through the firms's industry specialization program, Arthur Andersen partners have developed expertise in analyzing and assisting wholesale distribution companies.
 Wholesale Distribution Industry Confidence Index Survey
 Survey Conducted January 1992
 -- Summary Data --
 Overall Index
 Confidence Index -- Historical Data
 Third quarter/Fourth quarter 1989 100.0 (initial
 confidence survey)
 Fourth quarter 1989/First quarter 1990 98.3
 First quarter/Second quarter 1990 102.0
 Second quarter/Third quarter 1990 93.0
 Third quarter/Fourth quarter 1990 95.5
 Fourth quarter 1990/First quarter 1991 89.2
 First quarter/Second quarter 1991 88.9
 Second quarter/Third quarter 1991 87.5
 Third quarter/Fourth quarter 1991 87.4
 Fourth quarter 1991/First quarter 1992 88.4
 Detailed Components (all responses are mean)
 Actual 4th Qrtr. 1991 Estimated 1st Qrtr. 1992
 vs. vs.
 Actual 4th Qrtr. 1990 Actual 1st Qrtr. 1991
 1) Net sales +1.52 pct. +2.46 pct.
 (gross sales minus returns and allowances)
 2) Gross Margin -0.25 pct. -0.34 pct.
 (ratio of gross margin
 dollars to net sales) (A)
 3) Net income -5.02 pct. +4.74 pct.
 (income or loss after taxes)
 4) Inventory +0.41 pct. -0.42 pct.
 (inventory levels, measured by
 gross inventory dollars)
 5) Full time equivalent
 employees -1.65 pct. -1.54 pct.
 (number of employees with a part-time
 employee equal to 1/2 of a full-time employee)
 6) Capital spending +0.18 pct. +2.07 pct.
 (dollars invested in facilities,
 equipment and software)
 7) Incoming orders +0.82 pct. +2.59 pct.
 (net sales orders measured in total dollars)
 8) Number of days sales
 outstanding +1.13 pct. +0.25 pct.
 (number of days included in accounts receivable)
 (A) The percentage for this measure relates to relative changes in the gross margin percent. Thus, a decrease in the gross margin percent from 29 percent to 28 percent would be a 3.4 decrease.
 -0- 2/14/92
 /NOTE: A camera-ready graphic is available./
 /CONTACT: Ron Schreibman or Philip B. Jaffa of the National Association of Wholesaler Distributors, 202-872-0885; or Patrick W. Dolan, 312-507-7278, or Rick Prohammer, 312-507-6422, both of Arthur Andersen/ CO: National Association of Wholesaler-Distributors; Arthur Andersen ST: District of Columbia IN: SU: ECO


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Date:Feb 14, 1992
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