FOR RELEASE: June 1, 2011

Contact:

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

PMI at 53.5%

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 2011.

New Orders, Production and Employment Growing
Supplier Deliveries Slower
Inventories Contracting

(Tempe, Arizona) — Economic activity in the manufacturing sector expanded in May for the 22nd consecutive month, and the overall economy grew for the 24th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business^®.

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The PMI registered 53.5 percent and indicates expansion in the manufacturing sector for the 22nd consecutive month. This month's index, however, registered 6.9 percentage points below the April reading of 60.4 percent, and is the first reading below 60 percent for 2011, as well as the lowest PMI reported for the past 12 months. Slower growth in new orders and production are the primary contributors to this month's lower PMI reading. Manufacturing employment continues to show good momentum for the year, as the Employment Index registered 58.2 percent, which is 4.5 percentage points lower than the 62.7 percent reported in April. Manufacturers continue to experience significant cost pressures from commodities and other inputs."

PERFORMANCE BY INDUSTRY

Of the 18 manufacturing industries, 14 are reporting growth in May, in the following order: Nonmetallic Mineral Products; Petroleum & Coal Products; Machinery; Transportation Equipment; Computer & Electronic Products; Textile Mills; Electrical Equipment, Appliances & Components; Primary Metals; Miscellaneous Manufacturing; Paper Products; Chemical Products; Plastics & Rubber Products; Apparel, Leather & Allied Products; and Fabricated Metal Products. The three industries reporting contraction in May are: Printing & Related Support Activities; Furniture & Related Products; and Food, Beverage & Tobacco Products.

WHAT RESPONDENTS ARE SAYING ...

• "Chemical prices are under increasing cost pressure, driven by feedstock and transportation costs." (Chemical Products)
• "Continued growth through beginning of second quarter, with strong backlog and outlook for at least the next three months." (Electrical Equipment, Appliances & Components)
• "Business levels remain strong — better than last year by 20+ percent, but not back to 2008 or early 2009 levels." (Fabricated Metal Products)
• "Demand remains strong; however, inflation is evident everywhere in virtually every material purchased." (Paper Products)
• "Bad weather is impacting retail business." (Printing & Related Support Activities)
• "Business is still strong, but we are more aware of a possible softening than previously." (Machinery)

MANUFACTURING AT A GLANCE MAY 2011
Index	Series Index May	Series Index April	Percentage Point Change	Direction	Rate of Change	Trend* (Months)
PMI	53.5	60.4	-6.9	Growing	Slower	22
New Orders	51.0	61.7	-10.7	Growing	Slower	23
Production	54.0	63.8	-9.8	Growing	Slower	24
Employment	58.2	62.7	-4.5	Growing	Slower	20
Supplier Deliveries	55.7	60.2	-4.5	Slowing	Slower	24
Inventories	48.7	53.6	-4.9	Contracting	From Growing	1
Customers' Inventories	39.5	40.5	-1.0	Too Low	Faster	26
Prices	76.5	85.5	-9.0	Increasing	Slower	23
Backlog of Orders	50.5	61.0	-10.5	Growing	Slower	5
Exports	55.0	62.0	-7.0	Growing	Slower	23
Imports	54.5	55.5	-1.0	Growing	Slower	21
OVERALL ECONOMY				Growing	Slower	24
Manufacturing Sector				Growing	Slower	22

*Number of months moving in current direction.

COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price

Adhesives; Aluminum (9); Aluminum Products (5); Brass Products; Butadiene; Caustic Soda (3); Chemicals (3); Cocoa/Cocoa Powder (4); Copper* (10); Copper Based Products (7); Diesel (6); Electric/Electronic Components (3); Foam; Fuel Oils (5); Fuel Surcharges (3); Gasoline; Glycol Ether; High Density Polyethylene (3); Nickel Products; Oils and Lubricants (2); Packaging Materials; Paper; Petroleum Based Products; Plastics (5); Plastic Products (5); Polypropylene (5); Polypropylene Resins; Propylene Glycol; Resins (3); Rubber Products (4); Shrink Wrap Film; Silver (3); Stainless Steel (7); Steel* (9); Steel — Cold Rolled (2); Steel Products (6); and Titanium Dioxide (2).

Commodities Down in Price

Copper*; and Steel*.

Commodities in Short Supply

Electric/Electronic Components (5); Nylon/Nylon Polymer; Resins; Rubber Products; and Titanium Dioxide (3).

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 2011 MANUFACTURING INDEX SUMMARIES

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PMI

Manufacturing continued its growth in May as the PMI registered 53.5 percent, a decrease of 6.9 percentage points when compared to April's reading of 60.4 percent. 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 42.5 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the 24th consecutive month in the overall economy, as well as expansion in the manufacturing sector for the 22nd consecutive month. Holcomb stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through May (59.5 percent) corresponds to a 5.9 percent increase in real gross domestic product (GDP). In addition, if the PMI for May (53.5 percent) is annualized, it corresponds to a 3.8 percent increase in real GDP annually."

THE LAST 12 MONTHS

Month	PMI		Month	PMI
May 2011	53.5		Nov 2010	58.2
Apr 2011	60.4		Oct 2010	56.9
Mar 2011	61.2		Sep 2010	55.3
Feb 2011	61.4		Aug 2010	55.2
Jan 2011	60.8		Jul 2010	55.1
Dec 2010	58.5		Jun 2010	55.3
Average for 12 months – 57.7 High – 61.4 Low – 53.5

New Orders

ISM's New Orders Index registered 51 percent in May, which is a decrease of 10.7 percentage points when compared to the 61.7 percent reported in April. This is the 23rd consecutive month of growth in the New Orders Index. A New Orders Index above 52.1 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars).

The 11 industries reporting growth in new orders in May — listed in order — are: Nonmetallic Mineral Products; Petroleum & Coal Products; Paper Products; Transportation Equipment; Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Primary Metals; Miscellaneous Manufacturing; Chemical Products; Machinery; and Fabricated Metal Products. The four industries reporting decreases in new orders in May are: Furniture & Related Products; Printing & Related Support Activities; Food, Beverage & Tobacco Products; and Computer & Electronic Products.

New Orders	% Better	% Same	% Worse	Net	Index
May 2011	30	54	16	+14	51.0
Apr 2011	49	43	8	+41	61.7
Mar 2011	43	47	10	+33	63.3
Feb 2011	43	46	11	+32	68.0

Production

ISM's Production Index registered 54 percent in May, which is a decrease of 9.8 percentage points when compared to the April reading of 63.8 percent. An index above 51 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures. This is the 24th consecutive month the Production Index has registered above 50 percent.

The 12 industries reporting growth in production during the month of May — listed in order — are: Plastics & Rubber Products; Nonmetallic Mineral Products; Petroleum & Coal Products; Paper Products; Electrical Equipment, Appliances & Components; Apparel, Leather & Allied Products; Machinery; Primary Metals; Miscellaneous Manufacturing; Fabricated Metal Products; Transportation Equipment; and Computer & Electronic Products. The four industries reporting a decrease in production in May are: Furniture & Related Products; Printing & Related Support Activities; Food, Beverage & Tobacco Products; and Chemical Products.

Production	% Better	% Same	% Worse	Net	Index
May 2011	30	56	14	+16	54.0
Apr 2011	43	52	5	+38	63.8
Mar 2011	41	52	7	+34	69.0
Feb 2011	43	47	10	+33	66.3

Employment

ISM's Employment Index registered 58.2 percent in May, which is 4.5 percentage points lower than the 62.7 percent reported in April. This is the 20th consecutive month of growth in manufacturing employment. An Employment Index above 50.1 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Of the 18 manufacturing industries, 11 reported growth in employment in May in the following order: Textile Mills; Nonmetallic Mineral Products; Computer & Electronic Products; Transportation Equipment; Machinery; Primary Metals; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Chemical Products; and Fabricated Metal Products. The two industries reporting a decrease in employment are: Electrical Equipment, Appliances & Components; and Petroleum & Coal Products. Five industries reported no change in employment in May compared to April.

Employment	% Higher	% Same	% Lower	Net	Index
May 2011	31	60	9	+22	58.2
Apr 2011	34	61	5	+29	62.7
Mar 2011	33	59	8	+25	63.0
Feb 2011	35	56	9	+26	64.5

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower in May as the Supplier Deliveries Index registered 55.7 percent, which is 4.5 percentage points lower than the 60.2 percent registered in April. This is the 24th consecutive month the Supplier Deliveries Index has been above 50 percent. A reading above 50 percent indicates slower deliveries.

The seven industries reporting slower supplier deliveries in May — listed in order — are: Textile Mills; Machinery; Chemical Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Computer & Electronic Products; and Miscellaneous Manufacturing. The four industries reporting faster deliveries in May are: Printing & Related Support Activities; Apparel, Leather & Allied Products; Plastics & Rubber Products; and Fabricated Metal Products.

Supplier Deliveries	% Slower	% Same	% Faster	Net	Index
May 2011	22	70	8	+14	55.7
Apr 2011	24	73	3	+21	60.2
Mar 2011	26	73	1	+25	63.1
Feb 2011	24	69	7	+17	59.4

Inventories

Manufacturers' inventories contracted in May for the third time in the past four months. The Inventories Index registered 48.7 percent, 4.9 percentage points lower than the 53.6 percent reported in April. An Inventories Index greater than 42.7 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis' (BEA) figures on overall manufacturing inventories (in chained 2000 dollars).

The three industries reporting higher inventories in May are: Computer & Electronic Products; Miscellaneous Manufacturing; and Machinery. The 10 industries reporting decreases in inventories in May — listed in order — are: Textile Mills; Furniture & Related Products; Paper Products; Nonmetallic Mineral Products; Plastics & Rubber Products; Printing & Related Support Activities; Transportation Equipment; Fabricated Metal Products; Electrical Equipment, Appliances & Components; and Apparel, Leather & Allied Products.

Inventories	% Higher	% Same	% Lower	Net	Index
May 2011	20	57	23	-3	48.7
Apr 2011	27	55	18	+9	53.6
Mar 2011	19	60	21	-2	47.4
Feb 2011	19	63	18	+1	48.8

Customers' Inventories*

The ISM Customers' Inventories Index registered 39.5 percent in May, 1 percentage point lower than in April when the index registered 40.5 percent. This is the 26th consecutive month the Customers' Inventories Index has been below 50 percent, indicating that respondents believe their customers' inventories are too low at this time.

The only manufacturing industry reporting customers' inventories as being too high during May is Food, Beverage & Tobacco Products. The 10 industries reporting customers' inventories as too low during May — listed in order — are: Plastics & Rubber Products; Primary Metals; Textile Mills; Computer & Electronic Products; Nonmetallic Mineral Products; Petroleum & Coal Products; Machinery; Chemical Products; Electrical Equipment, Appliances & Components; and Transportation Equipment. Seven industries reported no change in customers' inventories for the month of May compared to April.

Customers' Inventories	% Reporting	%Too High	%About Right	%Too Low	Net	Index
May 2011	72	6	67	27	-21	39.5
Apr 2011	73	9	63	28	-19	40.5
Mar 2011	62	11	57	32	-21	39.5
Feb 2011	66	7	66	27	-20	40.0

Prices*

The ISM Prices Index registered 76.5 percent in May, 9 percentage points lower than the 85.5 percent reported in April. This is the first time the Prices Index has registered below 80 percent since December 2010, and is the 23rd consecutive month the index has registered above 50 percent. While 58 percent of respondents reported paying higher prices and 5 percent reported paying lower prices, 37 percent of supply executives reported paying the same prices as in April. A Prices Index above 49.4 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices.

Of the 18 manufacturing industries, 15 report paying increased prices during the month of May, in the following order: Nonmetallic Mineral Products; Chemical Products; Paper Products; Machinery; Apparel, Leather & Allied Products; Furniture & Related Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Computer & Electronic Products; Textile Mills; Plastics & Rubber Products; Transportation Equipment; Petroleum & Coal Products; Fabricated Metal Products; and Electrical Equipment, Appliances & Components. No manufacturing industry reported paying lower prices on average in May.

Prices	% Higher	% Same	% Lower	Net	Index
May 2011	58	37	5	+53	76.5
Apr 2011	72	27	1	+71	85.5
Mar 2011	72	26	2	+70	85.0
Feb 2011	66	32	2	+64	82.0

NOTE: A list of commodities up in price and down in price is available on pages 2 and 3 of this report.

Backlog of Orders*

ISM's Backlog of Orders Index registered 50.5 percent in May, which is 10.5 percentage points lower than the 61 percent reported in April. Of the 85 percent of respondents who reported their backlog of orders, 21 percent reported greater backlogs, 20 percent reported smaller backlogs, and 59 percent reported no change from April.

The five industries reporting increased order backlogs in May are: Primary Metals; Electrical Equipment, Appliances & Components; Chemical Products; Machinery; and Transportation Equipment. The seven industries reporting decreases in order backlogs during May — listed in order — are: Miscellaneous Manufacturing; Furniture & Related Products; Apparel, Leather & Allied Products; Plastics & Rubber Products; Printing & Related Support Activities; Fabricated Metal Products; and Computer & Electronic Products. Six industries reported no change in order backlogs in May compared to April.

Backlog of Orders	% Reporting	% Greater	% Same	% Less	Net	Index
May 2011	85	21	59	20	+1	50.5
Apr 2011	88	34	54	12	+22	61.0
Mar 2011	85	26	53	21	+5	52.5
Feb 2011	82	31	56	13	+18	59.0

New Export Orders*

ISM's New Export Orders Index registered 55 percent in May, which is 7 percentage points lower than the 62 percent reported in April. This is the 23rd consecutive month of growth in the New Export Orders Index.

The eight industries reporting growth in new export orders in May — listed in order — are: Paper Products; Petroleum & Coal Products; Primary Metals; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Chemical Products; and Machinery. The three industries reporting a decrease in new export orders during May are: Plastics & Rubber Products; Food, Beverage & Tobacco Products; and Miscellaneous Manufacturing. Six industries reported no change in exports in May compared to April.

New Export Orders	% Reporting	% Higher	% Same	% Lower	Net	Index
May 2011	79	20	70	10	+10	55.0
Apr 2011	81	28	68	4	+24	62.0
Mar 2011	80	23	66	11	+12	56.0
Feb 2011	81	31	63	6	+25	62.5

Imports*

Imports of materials by manufacturers continued to expand in May as the Imports Index registered 54.5 percent, 1 percentage point lower than the 55.5 percentage points reported in April. This is the 21st consecutive month of growth in imports.

The nine industries reporting growth in imports during the month of May — listed in order — are: Petroleum & Coal Products; Primary Metals; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Miscellaneous Manufacturing; Machinery; Transportation Equipment; Chemical Products; and Fabricated Metal Products. The only industry reporting a decrease in imports during May is Plastics & Rubber Products. Eight industries reported no change in imports in May compared to April.

Imports	% Reporting	% Higher	% Same	% Lower	Net	Index
May 2011	78	17	75	8	+9	54.5
Apr 2011	81	20	71	9	+11	55.5
Mar 2011	78	18	77	5	+13	56.5
Feb 2011	77	19	72	9	+10	55.0

* 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 decreased 4 days to 104 days. Average lead time for Production Materials increased 2 days to 61 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies increased 5 days to 28 days.

Percent Reporting
Capital Expenditures	Hand- to- Mouth	30 Days	60 Days	90 Days	6 Months	1 Year+	Average Days
May 2011	30	9	11	16	24	10	104
Apr 2011	28	6	16	16	23	11	108
Mar 2011	27	12	11	16	23	11	107
Feb 2011	32	7	8	18	24	11	108
Production Materials	Hand- to- Mouth	30 Days	60 Days	90 Days	6 Months	1 Year+	Average Days
May 2011	15	36	28	12	6	3	61
Apr 2011	15	36	27	15	4	3	59
Mar 2011	17	38	27	13	3	2	53
Feb 2011	15	38	26	13	7	1	56
MRO Supplies	Hand- to- Mouth	30 Days	60 Days	90 Days	6 Months	1 Year+	Average Days
May 2011	46	37	13	2	1	1	28
Apr 2011	44	43	12	1	0	0	23
Mar 2011	48	39	11	2	0	0	23
Feb 2011	51	36	10	2	1	0	23

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 42.5 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 42.5 percent, it is generally declining. The distance from 50 percent or 42.5 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 2011 data will be released at 10:00 a.m. (ET) on Friday, July 1, 2011.

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