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FOR RELEASE: June 1, 2009

Contact:

Rose Marie Goupil ISM, ROB Media Relations Tempe, Arizona 800/888-6276, Ext. 3015 E-mail: rgoupil@ism.ws

May 2009 Manufacturing ISM Report On Business^®

PMI at 42.8%

DO NOT CONFUSE THIS NATIONAL REPORT with the various regional purchasing reports released across the country. The national report's information reflects the entire United States, while the regional reports contain primarily regional data from their local vicinities. Also, the information in the regional reports is not used in calculating the results of the national report. The information compiled in this report is for the month of May 2009.

New Orders Growing
Production, Employment and Inventories Contracting
Prices Falling
Supplier Deliveries Faster

(Tempe, Arizona) — Economic activity in the manufacturing sector failed to grow in May for the 16th consecutive month, while the overall economy grew for the first time following seven months of decline, say the nation's supply executives in the latest Manufacturing ISM Report On Business^®.

The report was issued today by Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "While employment and inventories continue to decline at a rapid rate and the sector continued to contract during the month, there are signs of improvement. May is the first month of growth in the New Orders Index since November 2007, with nine of 18 industries reporting growth. New orders are considered a leading indicator, and the index has risen rapidly after bottoming at 23.1 percent in December 2008. Also, the Customers' Inventories Index remained below 50 percent for the second consecutive month, offering encouragement that supply chains are starting to free themselves of excess inventories as nine industries report their customers' inventories as 'too low'. The prices that manufacturers pay for raw materials and services continued to decline, but at a slower rate than in April."

PERFORMANCE BY INDUSTRY

Five of the 18 manufacturing industries reported growth in May. These industries — listed in order — are: Nonmetallic Mineral Products; Plastics & Rubber Products; Machinery; Food, Beverage & Tobacco Products; and Printing & Related Support Activities. The industries reporting contraction in May — listed in order — are: Textile Mills; Furniture & Related Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Primary Metals; Transportation Equipment; Computer & Electronic Products; Wood Products; Apparel, Leather & Allied Products; Miscellaneous Manufacturing; Chemical Products; Petroleum & Coal Products; and Paper Products.

WHAT RESPONDENTS ARE SAYING ...

• "Some amount of havoc is about to erupt, with companies pushing for increased capacity when suppliers have taken capacity offline." (Computer & Electronic Products)
• "Business is actually better than plan." (Food, Beverage & Tobacco Products)
• "Realistically, we don't see any of our major customers looking to place business until mid-2010 at the earliest." (Machinery)
• "April was flat on sales. May looking better." (Primary Metals)
• "Business still trending downward, but not as fast." (Chemical Products)

MANUFACTURING AT A GLANCE MAY 2009
Index	Series Index May	Series Index April	Percentage Point Change	Direction	Rate of Change	Trend* (Months)
PMI	42.8	40.1	+2.7	Contracting	Slower	16
New Orders	51.1	47.2	+3.9	Growing	From Contracting	1
Production	46.0	40.4	+5.6	Contracting	Slower	9
Employment	34.3	34.4	-0.1	Contracting	Faster	10
Supplier Deliveries	49.8	44.9	+4.9	Faster	Slower	8
Inventories	32.9	33.6	-0.7	Contracting	Faster	37
Customers' Inventories	46.0	49.5	-3.5	Too Low	Faster	2
Prices	43.5	32.0	+11.5	Decreasing	Slower	8
Backlog of Orders	48.0	40.5	+7.5	Contracting	Slower	13
Exports	48.0	44.0	+4.0	Contracting	Slower	8
Imports	42.5	42.0	+0.5	Contracting	Slower	16
OVERALL ECONOMY				Growing	From Contracting	1
Manufacturing Sector				Contracting	Slower	16

*Number of months moving in current direction

COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price

#2 Fuel Oil and Natural Gas* are the only commodities reported up in price.

Commodities Down in Price

Aluminum Based Products (2); Caustic Soda (3); Corrugated Containers (5); Natural Gas* (10); Stainless Steel Related Products; Steel (9); and Steel Products (4).

Commodities in Short Supply

No commodities are reported in short supply.

Note: The number of consecutive months the commodity is listed is indicated after each item.
*Reported as both up and down in price.

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MAY 2009 MANUFACTURING INDEX SUMMARIES

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PMI

Manufacturing contracted in May as the PMI registered 42.8 percent, which is 2.7 percentage points higher than the 40.1 percent reported in April. This is the 16th consecutive month of contraction in the manufacturing sector. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

A PMI in excess of 41.2 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth in the overall economy following seven months of decline, and continuing contraction in the manufacturing sector. Ore stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through May (38.1 percent) corresponds to a 1 percent decrease in real gross domestic product (GDP). In addition, if the PMI for May (42.8 percent) is annualized, it corresponds to a 0.5 percent increase in real GDP annually."

THE LAST 12 MONTHS

Month	PMI		Month	PMI
May 2009	42.8		Nov 2008	36.6
Apr 2009	40.1		Oct 2008	38.7
Mar 2009	36.3		Sep 2008	43.4
Feb 2009	35.8		Aug 2008	49.3
Jan 2009	35.6		Jul 2008	49.5
Dec 2008	32.9		Jun 2008	49.5
Average for 12 months – 40.9 High – 49.5 Low – 32.9

New Orders

ISM's New Orders Index registered 51.1 percent in May, 3.9 percentage points higher than the 47.2 percent registered in April. This is the first month the New Orders Index has moved above 50 percent, following 17 consecutive months of contraction. A New Orders Index above 48.8 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars).

The nine industries reporting growth in new orders in May — listed in order — are: Plastics & Rubber Products; Paper Products; Primary Metals; Printing & Related Support Activities; Machinery; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Chemical Products; and Miscellaneous Manufacturing. The industries contracting in May — listed in order — are: Textile Mills; Furniture & Related Products; Transportation Equipment; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Petroleum & Coal Products; and Wood Products.

New Orders	% Better	% Same	% Worse	Net	Index
May 2009	27	54	19	+8	51.1
Apr 2009	31	40	29	+2	47.2
Mar 2009	28	31	41	-13	41.2
Feb 2009	13	43	44	-31	33.1

Production

ISM's Production Index registered 46 percent in May, which is an increase of 5.6 percentage points from April's reading of 40.4 percent. An index above 50.4 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures. This is the ninth consecutive month of decline in production.

The eight industries reporting growth in production during the month of May — listed in order — are: Printing & Related Support Activities; Plastics & Rubber Products; Nonmetallic Mineral Products; Petroleum & Coal Products; Machinery; Paper Products; Electrical Equipment, Appliances & Components; and Chemical Products. The industries that reported decreases in production in May — listed in order — are: Textile Mills; Furniture & Related Products; Fabricated Metal Products; Primary Metals; Transportation Equipment; Computer & Electronic Products; and Wood Products.

Production	% Better	% Same	% Worse	Net	Index
May 2009	23	52	25	-2	46.0
Apr 2009	21	45	34	-13	40.4
Mar 2009	17	39	44	-27	36.4
Feb 2009	16	40	44	-28	36.3

Employment

ISM's Employment Index registered 34.3 percent in May, which is 0.1 percentage point lower than the 34.4 percent reported in April. This is the 10th consecutive month of decline in employment. An Employment Index above 49.7 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Two of the 18 manufacturing industries reported growth in employment in May: Nonmetallic Mineral Products; and Food, Beverage & Tobacco Products. The industries that reported decreases in employment during May — listed in order — are: Wood Products; Primary Metals; Furniture & Related Products; Textile Mills; Electrical Equipment, Appliances & Components; Transportation Equipment; Fabricated Metal Products; Paper Products; Miscellaneous Manufacturing; Petroleum & Coal Products; Printing & Related Support Activities; Chemical Products; Machinery; and Computer & Electronic Products.

Employment	% Higher	% Same	% Lower	Net	Index
May 2009	8	56	36	-28	34.3
Apr 2009	7	58	35	-28	34.4
Mar 2009	8	41	51	-43	28.1
Feb 2009	6	40	54	-48	26.1

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was faster for the eighth consecutive month in May as the Supplier Deliveries Index registered 49.8 percent, which is 4.9 percentage points higher than the 44.9 percent registered in April. A reading above 50 percent indicates slower deliveries.

The six industries reporting slower supplier deliveries in May are: Wood Products; Computer & Electronic Products; Nonmetallic Mineral Products; Machinery; Transportation Equipment; and Miscellaneous Manufacturing. The industries reporting faster deliveries in May are: Chemical Products and Fabricated Metal Products.

Supplier Deliveries	% Slower	% Same	% Faster	Net	Index
May 2009	8	86	6	+2	49.8
Apr 2009	5	80	15	-10	44.9
Mar 2009	7	73	20	-13	43.6
Feb 2009	6	78	16	-10	46.7

Inventories

Manufacturers' inventories contracted in May as the Inventories Index registered 32.9 percent, which is 0.7 percentage point lower than April's reading of 33.6 percent. An Inventories Index greater than 42.6 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis' (BEA) figures on overall manufacturing inventories (in chained 2000 dollars).

None of the 18 manufacturing industries reported higher inventories in May. The industries that reported decreases in May — listed in order — are: Electrical Equipment, Appliances & Components; Computer & Electronic Products; Primary Metals; Furniture & Related Products; Apparel, Leather & Allied Products; Textile Mills; Fabricated Metal Products; Paper Products; Petroleum & Coal Products; Printing & Related Support Activities; Wood Products; Plastics & Rubber Products; Machinery; Chemical Products; Miscellaneous Manufacturing; Transportation Equipment; Nonmetallic Mineral Products; and Food, Beverage & Tobacco Products.

Inventories	% Higher	% Same	% Lower	Net	Index
May 2009	10	46	44	-34	32.9
Apr 2009	11	47	42	-31	33.6
Mar 2009	9	48	43	-34	32.2
Feb 2009	19	38	43	-24	37.0

Customers' Inventories*

The ISM Customers' Inventories Index registered 46 percent in May, 3.5 percentage points lower than the 49.5 percent reported in April. The index indicates that respondents believe their customers' inventories are too low at this time. This is the second consecutive month the Customers' Inventories Index has been below 50 percent, following eight months above 50 percent.

Five industries reported higher customers' inventories during May: Textile Mills; Furniture & Related Products; Computer & Electronic Products; Electrical Equipment, Appliances & Components; and Fabricated Metal Products. The industries that reported lower customers' inventories during May are: Plastics & Rubber Products; Chemical Products; Primary Metals; Nonmetallic Mineral Products; Printing & Related Support Activities; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Machinery; and Wood Products.

Customers' Inventories	% Reporting	%Too High	%About Right	%Too Low	Net	Index
May 2009	72	23	46	31	-8	46.0
Apr 2009	80	21	57	22	-1	49.5
Mar 2009	78	29	50	21	+8	54.0
Feb 2009	80	28	46	26	+2	51.0

Prices*

The ISM Prices Index registered 43.5 percent in May, 11.5 percentage points higher than the 32 percent reported in April. Since the index is below the mid-point of 50, this indicates that manufacturers continue to pay lower prices on average when compared to the previous month. While 10 percent of respondents reported paying higher prices and 23 percent reported paying lower prices, 67 percent of supply executives reported paying the same prices as in April. A Prices Index above 47.6 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices.

In May, Plastics & Rubber Products is the only industry reporting paying increased prices. The industries that reported paying lower prices during May — listed in order — are: Nonmetallic Mineral Products; Paper Products; Fabricated Metal Products; Machinery; Electrical Equipment, Appliances & Components; Primary Metals; Transportation Equipment; Chemical Products; Computer & Electronic Products; and Wood Products.

Prices	% Higher	% Same	% Lower	Net	Index
May 2009	10	67	23	-13	43.5
Apr 2009	7	50	43	-36	32.0
Mar 2009	7	48	45	-38	31.0
Feb 2009	7	44	49	-42	29.0

Backlog of Orders*

ISM's Backlog of Orders Index registered 48 percent in May, 7.5 percentage points higher than the 40.5 percent reported in April. Of the 85 percent of respondents who reported their backlog of orders, 19 percent reported greater backlogs, 23 percent reported smaller backlogs, and 58 percent reported no change from April.

The six industries reporting increased order backlogs in May — listed in order — are: Plastics & Rubber Products; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Paper Products; Machinery; and Miscellaneous Manufacturing. The industries that reported decreases in order backlogs during May — listed in order — are: Petroleum & Coal Products; Wood Products; Fabricated Metal Products; Furniture & Related Products; Transportation Equipment; Chemical Products; and Computer & Electronic Products.

Backlog of Orders	% Reporting	% Greater	% Same	% Less	Net	Index
May 2009	85	19	58	23	-4	48.0
Apr 2009	86	13	55	32	-19	40.5
Mar 2009	83	11	49	40	-29	35.5
Feb 2009	86	8	46	46	-38	31.0

New Export Orders*

ISM's New Export Orders Index registered 48 percent in May, 4 percentage points higher than the 44 percent reported in April. This is the eighth consecutive month of contraction in the New Export Orders Index.

The three industries reporting growth in new export orders in May are: Machinery; Food, Beverage & Tobacco Products; and Electrical Equipment, Appliances & Components. The industries that reported decreases in new export orders in May — listed in order — are: Nonmetallic Mineral Products; Textile Mills; Transportation Equipment; Fabricated Metal Products; Miscellaneous Manufacturing; and Computer & Electronic Products.

New Export Orders	% Reporting	% Higher	% Same	% Lower	Net	Index
May 2009	77	7	82	11	-4	48.0
Apr 2009	77	13	62	25	-12	44.0
Mar 2009	80	9	60	31	-22	39.0
Feb 2009	79	7	61	32	-25	37.5

Imports*

Imports of materials by manufacturers contracted during May as the Imports Index registered 42.5 percent, 0.5 percentage point higher than the 42 percent reported in April. This is the 16th consecutive month of contraction in imports.

Four of the 18 manufacturing industries reported growth in imports during the month of May: Machinery; Fabricated Metal Products; Chemical Products; and Miscellaneous Manufacturing. The industries that reported decreases in imports — listed in order — are: Textile Mills; Computer & Electronic Products; Primary Metals; Transportation Equipment; Furniture & Related Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; and Nonmetallic Mineral Products.

Imports	% Reporting	% Higher	% Same	% Lower	Net	Index
May 2009	83	12	61	27	-15	42.5
Apr 2009	85	10	64	26	-16	42.0
Mar 2009	85	5	56	39	-34	33.0
Feb 2009	80	7	50	43	-36	32.0

* The Backlog of Orders, Prices, Customers' Inventories, Imports and New Export Orders Indexes do not meet the accepted criteria for seasonal adjustments.

Buying Policy

Average commitment lead time for Capital Expenditures increased 10 days to 111 days. Average lead time for Production Materials increased 1 day to 45 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies increased 1 day to 23 days.

Percent Reporting
Capital Expenditures	Hand- to- Mouth	30 Days	60 Days	90 Days	6 Months	1 Year+	Average Days
May 2009	30	9	13	12	23	13	111
Apr 2009	36	7	11	12	24	10	101
Mar 2009	30	11	14	11	23	11	104
Feb 2009	36	6	12	11	23	12	105
Production Materials	Hand- to- Mouth	30 Days	60 Days	90 Days	6 Months	1 Year+	Average Days
May 2009	31	38	21	4	3	3	45
Apr 2009	31	38	21	4	4	2	44
Mar 2009	35	35	20	3	5	2	43
Feb 2009	30	44	15	4	4	3	45
MRO Supplies	Hand- to- Mouth	30 Days	60 Days	90 Days	6 Months	1 Year+	Average Days
May 2009	52	33	12	2	1	0	23
Apr 2009	59	28	8	3	2	0	22
Mar 2009	56	33	7	3	1	0	21
Feb 2009	58	30	8	2	1	1	24

About this Report

The data presented herein is obtained from a survey of manufacturing supply managers based on information they have collected within their respective organizations. ISM makes no representation, other than that stated within this release, regarding the individual company data collection procedures. Use of the data is in the public domain and should be compared to all other economic data sources when used in decision-making.

Data and Method of Presentation

The Manufacturing ISM Report On Business^® is based on data compiled from purchasing and supply executives nationwide. Membership of the Manufacturing Business Survey Committee is diversified by NAICS, based on each industry's contribution to gross domestic product (GDP). Manufacturing Business Survey Committee responses are divided into the following NAICS code categories: Food, Beverage & Tobacco Products; Textile Mills; Apparel, Leather & Allied Products; Wood Products; Paper Products; Printing & Related Support Activities; Petroleum & Coal Products; Chemical Products; Plastics & Rubber Products; Nonmetallic Mineral Products; Primary Metals; Fabricated Metal Products; Machinery; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Furniture & Related Products; and Miscellaneous Manufacturing (products such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies).

Survey responses reflect the change, if any, in the current month compared to the previous month. For each of the indicators measured (New Orders, Backlog of Orders, New Export Orders, Imports, Production, Supplier Deliveries, Inventories, Customers' Inventories, Employment and Prices), this report shows the percentage reporting each response, the net difference between the number of responses in the positive economic direction (higher, better and slower for Supplier Deliveries) and the negative economic direction (lower, worse and faster for Supplier Deliveries), and the diffusion index. Responses are raw data and are never changed. The diffusion index includes the percent of positive responses plus one-half of those responding the same (considered positive).

The resulting single index number for those meeting the criteria for seasonal adjustments (PMI, New Orders, Production, Employment, Supplier Deliveries and Inventories) is then seasonally adjusted to allow for the effects of repetitive intra-year variations resulting primarily from normal differences in weather conditions, various institutional arrangements, and differences attributable to non-moveable holidays. All seasonal adjustment factors are supplied by the U.S. Department of Commerce and are subject annually to relatively minor changes when conditions warrant them. The PMI is a composite index based on the seasonally adjusted diffusion indexes for five of the indicators with equal weights: New Orders, Production, Employment, Supplier Deliveries and Inventories.

Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change and the scope of change. A PMI reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally declining. A PMI in excess of 41.2 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 41.2 percent, it is generally declining. The distance from 50 percent or 41.2 percent is indicative of the strength of the expansion or decline. With some of the indicators within this report, ISM has indicated the departure point between expansion and decline of comparable government series, as determined by regression analysis.

Responses to Buying Policy reflect the percent reporting the current month's lead time, the approximate weighted number of days ahead for which commitments are made for Production Materials; Capital Expenditures; and Maintenance, Repair and Operating (MRO) Supplies, expressed as hand-to-mouth (five days), 30 days, 60 days, 90 days, six months (180 days), a year or more (360 days), and the weighted average number of days. These responses are raw data, never revised, and not seasonally adjusted since there is no significant seasonal pattern.

The Manufacturing ISM Report On Business^® is published monthly by the Institute for Supply Management™. The Institute for Supply Management™, established in 1915, is the largest supply management organization in the world as well as one of the most respected. ISM's mission is to lead the supply management profession through its standards of excellence, research, promotional activities and education. This report has been issued by the association since 1931, except for a four-year interruption during World War II.

The full text version of the Manufacturing ISM Report On Business^® is posted on ISM's Web site at www.ism.ws on the first business day of every month after 10:10 a.m. (ET).

The next Manufacturing ISM Report On Business^® featuring the June 2009 data will be released at 10:00 a.m. (ET) on Wednesday, July 1, 2009.

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