FOR RELEASE: December 4, 2002

Contact:	Kristen Kioa
	ISM, Media Relations
	Tempe, Arizona
	(800) 888-6276, Ext. 3015

Business Activity at 57.4%

DO NOT CONFUSE THIS NATIONAL NON-MANUFACTURING REPORT with the various regional purchasing and supply reports released across the country or the Manufacturing ISM Report On Business®. The national non-manufacturing report's information reflects the entire United States, while the regional reports cover only their local vicinity. 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 November 2002.

New Orders, Prices, Order Backlogs, Exports, Imports Increase
Employment, Inventories Decrease

(Tempe, Arizona) ׻ Business activity in the non-manufacturing sector increased in November 2002, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business®.

The report was issued today by Ralph G. Kauffman, Ph.D., C.P.M., chair of the Institute for Supply Management™ Non-Manufacturing Business Survey Committee and coordinator of the purchasing and supply management program, University of Houston-Downtown. "In November, non-manufacturing business activity increased for the 10th consecutive month. The reported growth indicates a faster rate of expansion than reported in October," Kauffman said. He added, "Also in November, New Orders grew at a faster rate than in October, and the Backlog of Orders Index indicated the third consecutive month of increase in order backlogs."

Reports from purchasing and supply executives indicate nine industry groups grew in November, one group contracted, and seven industry groups reported no change from October. Increased business activity in November was reported by 30 percent of members, compared to October's 26 percent. Reduced activity was reported by 17 percent of members compared to 21 percent in October. In November, the remaining 53 percent of members indicated no change in business activity, the same as in October. The larger numbers of respondents reporting increased activity and smaller numbers reporting reduced activity reflects a faster rate of growth experienced by members overall in November. The Backlog of Orders Index in November indicated continued growth (but just barely with an index of 50.5 percent). Additional strength was shown by the November New Orders Index which increased significantly. Also noteworthy for November is the Inventory Sentiment Index of 61 percent, the lowest such index since March 2000. This may be an indication that inventories are finally beginning to approach desired levels. Although business activity and new orders are indicating faster growth, members' general comments continue to be mixed. Member comments on general business conditions included: "Concerns with the economy in the short term have placed even more of a burden on cost reduction. Purchasing is expected to play a significant role globally"; "Bleak economic outlook — customers are not purchasing capital items"; "Business continues to be steady"; and "Sales continue to improve above prior-year and prior-month levels."

In addition, Inventories decreased for the fourth month at the same rate of decrease as in October. Prices increased for the ninth month, also at the same rate of increase as in October. New Export Orders and Imports both increased, while Employment shrank for the 21st consecutive month. Supplier Deliveries indicated slower performance for the 15th consecutive month.

Significant reports of commodities in short supply or up or down in price in November indicate that beef is the only item in short supply. Price increases are reported for cocoa; corrugated; #2 diesel fuel; dairy; food; food products; freight charges; fuel; gasoline; #2 heating oil; petroleum products; plastic; pork; and 551 toners. Price decreases are reported for chicken; computers and peripherals; computer equipment; copier equipment; desktop computers; PVC pipe and conduit; and steel.

ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE and
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*

	Non-Manufacturing				Manufacturing
Index	November Index %	October Index %	Index Change from October	Direction & Rate of Change	November Index %	October Index %	Index Change from October
Business Activity/ Production	57.4	53.1	+4.3	Increasing faster	54.6	49.3	+5.3
New Orders	58.0	50.9	+7.1	Increasing faster	49.9	50.9	-1.0
Employment	45.9	46.2	-0.3	Decreasing faster	43.8	45.0	-1.2
Supplier Deliveries	52.5	53.5	-1.0	Slowing slower	50.8	52.6	-1.8
Inventories	44.0	44.0	0.0	Decreasing at same rate	42.1	40.2	+1.9
Prices	54.0	54.0	0.0	Increasing at same rate	55.7	58.3	-2.6
Backlog of Orders	50.5	52.0	-1.5	Increasing slower	42.5	43.5	-1.0
New Export Orders	58.5	49.0	+9.5	Increasing from decreasing	49.1	54.4	-5.3
Imports	55.1	54.9	+0.2	Increasing faster	53.1	48.7	+4.4
Inventory Sentiment	61.0	64.5	-3.5	Lesser feeling of "too high"	N/A
Customers’ Inventories	N/A				46.5	42.5	+4.0

* Non-Manufacturing ISM Report On Business® data is seasonally adjusted for Business Activity, New Orders, Imports, and Employment. Manufacturing ISM Report On Business® data is seasonally adjusted except for Backlog of Orders and Customer Inventories.

Business Activity

ISM's Non-Manufacturing Business Activity Index in November increased 4.3 percentage points on a seasonally adjusted basis to 57.4 percent from October's 53.1 percent. November's index indicates a rise in the rate of growth and extends to 10 the consecutive months of growth that began in February 2002. In November, nine sectors reported increased business activity, one sector reported decreased activity, and seven reported no change in activity compared to October.

The industries reporting the highest rates of growth of business activity in November are: Mining; Health Services; Other Services*; Utilities; and Wholesale Trade. The only industry reporting contraction of business activity in November is Retail Trade.

Business Activity	% Higher	% Same	% Lower	Index
November 2002	30	53	17	57.4
October 2002	26	53	21	53.1
September 2002	32	49	19	53.9
August 2002	24	52	24	50.9

New Orders

ISM's Non-Manufacturing New Orders Index rose to 58 percent in November from 50.9 percent in October. Comments from members include: "Additional promotions"; "Pent up demand: improving economy, annual cycle"; "Slow economy"; and "Budget cuts."

The industries reporting the highest rates of growth of new orders in November are: Mining; Transportation; Health Services; Other Services*; and Retail Trade. The industries reporting contraction of new orders in November are Finance & Banking and Public Administration.

New Orders	% Higher	% Same	% Lower	Index
November 2002	29	55	16	58.0
October 2002	26	49	25	50.9
September 2002	28	53	19	52.3
August 2002	24	54	22	51.6

Employment

Employment in the non-manufacturing sector contracted in November for the 21st consecutive month. ISM's Non-Manufacturing Employment Index for November is 45.9 percent compared to 46.2 percent in October. November's index indicates a slightly faster rate of decrease compared to October. Comments from respondents include: "Layoffs to reduce budgets"; "Continued to streamline our process and procedures"; and "Retirements and the positions will not be replaced."

The industries reporting growth in employment in November are: Entertainment; Insurance; Health Services; Other Services*; and Retail Trade. Industries reporting the highest rates of reduction in employment in November are: Agriculture; Communication; Utilities; Real Estate; and Public Administration.

Employment	% Higher	% Same	% Lower	Index
November 2002	13	66	21	45.9
October 2002	12	67	21	46.2
September 2002	13	65	22	46.6
August 2002	10	74	16	47.3

Supplier Deliveries

The delivery performance of suppliers to non-manufacturing organizations was slower for the 15th consecutive month in November. The index registered 52.5 percent, one percentage point lower than October's 53.5 percent. A reading above 50 percent indicates slower deliveries. Comments from purchasing and supply executives concerning supplier deliveries in November include: "Previous delivery problems rectified"; "Lower inventories"; "Key suppliers' backlogs have been reduced"; and "Some distributor inventories have been reduced and they are not maintaining adequate stocking levels."

The industries that reported the highest rates of slowing in supplier deliveries in November are: Transportation; Entertainment; Real Estate; Wholesale Trade; and Utilities. Industries reporting faster supplier deliveries in November are: Agriculture; Communication; and Construction.

Supplier Deliveries	% Slower	% Same	% Faster	Index
November 2002	9	87	4	52.5
October 2002	9	89	2	53.5
September 2002	9	87	4	52.5
August 2002	10	86	4	53.0

Inventories

ISM's Non-Manufacturing Inventories Index registered 44 percent in November, the same as reported in October. November's index means that material inventories maintained by non-manufacturing organizations decreased for the fourth consecutive month. Of the total respondents in November, 30 percent indicate they do not have inventories or do not measure them. Comments from members include: "Continuing to decrease level of inventory in warehouse"; "Concerted effort to lower inventories"; "Elimination of items that do not justify maintaining in stock"; "Keeping inventories as low as possible"; and "Better control."

The industries reporting inventory increases in November are: Insurance; Utilities; Agriculture; Wholesale Trade; and Health Services. Industries reporting the highest rates of inventory decrease in November are: Other Services*; Business Services; Public Administration; Communication; and Construction.

Inventory Change	% Higher	% Same	% Lower	Index
November 2002	15	58	27	44.0
October 2002	16	56	28	44.0
September 2002	14	61	25	44.5
August 2002	18	56	26	46.0

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased for the ninth consecutive month in November. ISM's Non-Manufacturing Prices Index for November is 54 percent, the same as in October. In November, the percentage of members reporting higher prices rose two percentage points to 18 percent from 16 percent in October, the proportion indicating no change dropped four percentage points to 72 percent, and the number who noted lower prices increased two points in November to 10 percent.

The industries reporting the highest rates of increase in prices paid in November are: Transportation; Real Estate; Utilities; Agriculture; and Entertainment. The only industry reporting price decreases in November is Communication.

Prices	% Higher	% Same	% Lower	Index
November 2002	18	72	10	54.0
October 2002	16	76	8	54.0
September 2002	15	75	10	52.5
August 2002	17	73	10	53.5

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index registered 50.5 percent in November. This is the third increase in order backlogs in six months and only the fourth increase in 23 months. The November index is a decrease of 1.5 percentage points from October's 52 percent. Of the total respondents in November, 40 percent indicated they do not measure backlog of orders. Purchasing and supply executives' comments on backlogs of orders include: "Problems with logistics due to West Coast port disruption"; "Not ordering as much"; "No backlog due to decrease in requests"; and "Congestion at port affecting inventory levels."

The industries reporting growth of backlog of orders in November are: Other Services*; Business Services; Communication; Entertainment; and Retail Trade. The industries reporting decline of order backlogs in November are: Agriculture; Wholesale Trade; Public Administration; and Construction.

Backlog of Orders	% Higher	% Same	% Lower	Index
November 2002	15	71	14	50.5
October 2002	19	66	15	52.0
September 2002	15	72	13	51.0
August 2002	15	66	19	48.0

New Export Orders

Orders and requests for services and other non-manufacturing activities to be provided outside of the United States by domestically-based personnel grew in November after a contraction in October. The New Export Orders Index for November is 58.5 percent compared to October's 49 percent. Of the total respondents in November, 77 percent indicated they either do not perform, or do not separately measure, orders for work outside the United States.

The industries reporting the highest rates of increase in new export orders in November are: Real Estate; Business Services; Mining; Retail Trade; Communication; and Other Services.* The only industry reporting a decrease in new export orders in November is Finance & Banking.

New Export Orders	% Higher	% Same	% Lower	Index
November 2002	26	65	9	58.5
October 2002	11	76	13	49.0
September 2002	24	67	9	57.5
August 2002	11	70	19	46.0

Imports

In November, use of imported materials by non-manufacturing industries increased for the fourth time in six months after dips in August and September. ISM's Non-Manufacturing Imports Index for November is 55.1 percent, a rise of 0.2 percentage point from the 54.9 percent reported in October. In November, 70 percent of respondents reported that they do not use or do not track use of imported materials.

The only industry reporting an increase in use of imports in November is Wholesale Trade. The industries reporting decreased use of imports in November are Communication and Retail Trade.

Imports	% Higher	% Same	% Lower	Index
November 2002	15	78	7	55.1
October 2002	20	67	13	54.9
September 2002	8	80	12	44.7
August 2002	9	80	11	48.3

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in November registered 61 percent, 3.5 percentage points lower than the 64.5 percent reported for October. This indicates that non-manufacturing purchasing and supply executives felt a lesser degree of discomfort with current levels of inventory in November than they did during October. In November, 26 percent of respondents felt their inventories were too high, 4 percent indicated their inventories were too low, and 70 percent said that their inventories were about right. November's index of 61 percent is the lowest since 60.5 percent was reported in March 2000. The 26 percent of respondents indicating inventories are too high is the lowest "too high" indication since February 1998's 26 percent.

The industries that reported the highest rates of feeling that their inventories were too high in November are: Legal Services; Mining; Insurance; Agriculture; Communication; and Utilities. No industry reported that its inventories were too low in November.

Inventory Sentiment	% Too High	% About Right	% Too Low	Index
November 2002	26	70	4	61.0
October 2002	34	61	5	64.5
September 2002	38	56	6	66.0
August 2002	30	64	6	62.0

*Other Services include:
Hotels, Rooming Houses, Camps, and Other Lodging Places; Personal Services; Automotive Repair, Services, and Parking; Miscellaneous Repair Services; Educational Services; Social Services; Museums, Art Galleries, and Botanical and Zoological Gardens; Membership Organizations; Engineering, Accounting, Research, Management, and Related Services; and Miscellaneous Services.

Commodities Reported in Short Supply

Beef.

Commodities Reported Up in Price

Cocoa; Corrugated — 5th month; #2 Diesel Fuel — 2nd month; Dairy; Food; Food Products; Freight Charges — 2nd month; Fuel — 2nd month; Gasoline — 2nd month; #2 Heating Oil; Petroleum Products; Plastic; Pork; 551 Toners.

Commodities Reported Down in Price

Chicken; Computers & Peripherals; Computer Equipment; Copier Equipment; Desktop Computers; PVC Pipe and Conduit; Steel.

Data and Method of Presentation

The Non-Manufacturing ISM Report on Business® is based on data compiled from monthly replies to questions asked of more than 370 purchasing and supply executives in over 62 different industries representing nine divisions from the Standard Industrial Classification (SIC) categories. Membership of the Business Survey Committee is diversified by SIC category and is based on each industry's contribution to Gross Domestic Product (GDP).

Survey responses reflect the change, if any, in the current month compared to the previous month. For each of the indicators measured (Business Activity, New Orders, Backlog of Orders, New Export Orders, Inventory Change, Inventory Sentiment, Imports, Prices, Employment, and Supplier Deliveries), this report shows the percentage reporting each response, the net difference between the number of responses in the positive economic direction (higher and slower for Supplier Deliveries) and the negative economic direction (lower and faster for Supplier Deliveries). Responses represent raw data and are never changed. Data is seasonally adjusted for Business Activity, New Orders, Imports, and Employment. The remaining indexes have not indicated significant seasonality.

A weighted composite index similar to the PMI that is so popular in the Manufacturing ISM Report on Business® is not available. Several years of data will need to be developed before that type of non-manufacturing indicator can be developed. Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change and the scope of change. An index reading above 50 percent indicates that the non-manufacturing economy in that index is generally expanding; below 50 percent, that it is generally declining. Supplier Deliveries is an exception. A Supplier Deliveries index above 50 percent indicates slower deliveries and below 50 percent indicates faster deliveries.

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.

The Non-Manufacturing ISM Report on Business® is published monthly by the Institute for Supply Management™, the largest supply management research and education organization in the United States. The Institute for Supply Management™, established in 1915, is the world's leading educator of supply management professionals and is a valuable resource for decision makers in major markets, companies, and government.

The full text version of the Non-Manufacturing ISM Report on Business® is posted on ISM's Web site at www.ism.ws on the third business day of every month after 10:10 a.m. (ET). The next Non-Manufacturing ISM Report on Business® featuring the December 2002 data will be released at 10:00 a.m. (ET) on January 6, 2003.

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