FOR RELEASE: June 3, 2002

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

PMI at 55.7%

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 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 May 2002.

New Orders, Production Growing
Supplier Deliveries Slowing
Employment, Inventories Decline
Exports, Imports Growing

(Tempe, Arizona) — Economic activity in the manufacturing sector grew for the fourth consecutive month in May. The overall economy grew for the seventh consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

The report was issued today by Norbert J. Ore, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee and group director, strategic sourcing and procurement, Georgia-Pacific Corporation. "May was a good month for manufacturing. The PMI strengthened as 16 industries saw improvement in new orders. This should help establish momentum in the sector that will carry forward into the third quarter."

ISM's Backlog of Orders Index indicates that order backlogs grew for the fourth consecutive month. ISM's Supplier Deliveries Index reflects slower deliveries for the fifth consecutive month. Manufacturing employment continued to decline in May as the index remained below the breakeven point (an index of 50 percent) for the 20th consecutive month. ISM's Prices Index is above 50 percent as manufacturers experienced higher prices for the third consecutive month. New Export Orders grew in May for the fifth consecutive month. May's Imports Index decelerated, while still registering growth for the sixth consecutive month.

Comments from purchasing and supply executives continue to vary greatly. An electronics industry respondent suggested the "economy is in search of its identity," while another said "some positive changes are coming into view." Metal fabricators report diverse comments as well, such as, "It appears the economy may be turning around" and "Sales are still relatively soft for the spring season. Adverse weather seems to be a factor."

ISM's PMI is 55.7 percent in May, an increase 1.8 percentage points from the 53.9 percent reported in April. ISM's New Orders Index rose from 59 percent in April to 63.1 percent in May. ISM's Production Index rose 0.5 percentage point from 58 percent in April to 58.5 percent in May. The ISM Employment Index is at 47.3 percent for May, an increase of 0.6 percentage point when compared to the 46.7 percent reported in April.

ISM's Supplier Deliveries Index registered 53.9 percent, compared to 53.7 percent in April. ISM's Inventories Index rose to 45.6 percent. ISM's Customer Inventories Index for May is at 39 percent, a slight decrease when compared to April's 40.5 percent, indicating less inventory in the supply chain. ISM's Prices Index in May is 63 percent, an increase of 2.7 percentage points from April's 60.3 percent. ISM's Backlog of Orders Index rose slightly from 56 percent in April to 56.5 percent in May.

ISM's New Export Orders Index registered 53.3 percent, up 1.4 percentage points from April's 51.9 percent. The rate of growth in imports slowed somewhat, as the Index declined from 55.7 percent in April to 53.6 percent in May.

"The growth in manufacturing activity continued and even gained some momentum during May. Some sectors are experiencing a faster recovery than others," added Ore. "May's PMI indicates the fourth consecutive month of significant growth. The pass-through of oil prices seems to have slowed. Energy is still a concern for many buyers. Primary Metals, Furniture, Transportation & Equipment, and Printing & Publishing are aggressively hiring at this time."

Of the 20 industries in the manufacturing sector, 18 industries reported growth: Petroleum; Textiles; Rubber & Plastic Products; Transportation & Equipment; Furniture; Glass, Stone & Aggregate; Instruments & Photographic Equipment; Primary Metals; Wood & Wood Products; Fabricated Metals; Electronic Components & Equipment; Tobacco; Paper; Chemicals; Printing & Publishing; Food; Industrial & Commercial Equipment & Computers; and Apparel.

"Steel is the only commodity reported in short supply. Commodities reported up in price are: Aluminum, High Density Polyethylene; Natural Gas, Paper, Plastic Film, Polyethylene, Resins, Steel, Steel - Cold Rolled, and Steel - Flat Rolled. The commodities reported down in price are: Caustic Soda, Corrugated Containers, and Packaging," Ore stated.

MAY 2002 ISM BUSINESS SURVEY AT A GLANCE

	Series Index	Direction May vs Apr	Rate of Change May vs Apr
PMI	55.7	Growing	Faster
New Orders	63.1	Growing	Faster
Production	58.5	Growing	Faster
Employment	47.3	Contracting	Slower
Supplier Deliveries	53.9	Slowing	Faster
Inventories	45.6	Contracting	Slower
Customer Inventories	39.0	Too Low	Faster
Prices	63.0	Increasing	Faster
Backlog of Orders	56.5	Growing	Faster
New Export Orders	53.3	Growing	Faster
Imports	53.6	Growing	Slower

THE ECONOMY AT A GLANCE

Overall Economy	Growing	Faster
Manufacturing	Growing	Faster

PMI

The PMI indicates that the manufacturing economy grew for the fourth consecutive month during May with an index of 55.7 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 42.7 percent, over a period of time, generally indicates an expansion of the overall economy. The May PMI indicates that both the overall economy and the manufacturing sector are growing. Ore added, "The past relationship between the PMI and the overall economy indicates that the average PMI for the months of January through May (54 percent) corresponds to 4.1 percent growth in real gross domestic product (GDP). However, if the PMI for May (55.7 percent) turned out to be the annual average for 2002, it would correspond to a 4.7 percent increase in GDP."

Month	May's02	Apr's02	Mar's02	Feb's02	Jan's02
PMI%	55.7	53.9	55.6	54.7	49.9
Month	Dec's01	Nov's01	Oct's01	Sep's01	Aug's01
PMI%	48.1	44.7	39.5	46.2	47.9
Month	Jul's01	Jun's01	May's01	Apr's01	Mar's01
PMI%	43.9	44.3	42.3	43.2	43.2

New Orders

ISM's New Orders Index indicated growth in May for the sixth consecutive month. The index is 63.1 percent, 4.1 percentage points higher than the 59 percent registered in April. A New Orders Index above 50.8 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 1987 dollars). Industries reporting increases for the month of May are: Petroleum; Rubber & Plastic Products; Furniture; Glass, Stone & Aggregate; Transportation & Equipment; Instruments & Photographic Equipment; Textiles; Wood & Wood Products; Electronic Components & Equipment; Paper; Primary Metals; Fabricated Metals; Chemicals; Food; Printing & Publishing; and Industrial & Commercial Equipment & Computers.

New Orders	% Better	% Same	% Worse	Net	Index
May 2002	43	45	12	+31	63.1
April 2002	44	43	13	+31	59.0
March 2002	49	40	11	+38	65.3
February 2002	39	47	14	+25	62.8

Production

ISM's Production Index is 58.5 percent in May, 0.5 percentage point higher than the 58 percent reported in April. This is the sixth consecutive month that the Production Index has been above 50 percent, indicating growth in manufacturing production. An index above 49.5 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures. Of the 19 industries reporting in May, the following registered growth: Petroleum; Instruments & Photographic Equipment; Tobacco; Textiles; Transportation & Equipment; Glass, Stone & Aggregate; Wood & Wood Products; Rubber & Plastic Products; Fabricated Metals; Primary Metals; Paper; Industrial & Commercial Equipment & Computers; Electronic Components & Equipment; Chemicals; Food; and Printing & Publishing.

Production	% Better	% Same	% Worse	Net	Index
May 2002	35	53	12	+23	58.5
April 2002	38	49	13	+25	58.0
March 2002	36	52	12	+24	57.8
February 2002	33	54	13	+20	61.2

Employment

ISM's Manufacturing Employment Index remained below 50 percent in May for the 20th consecutive month. The Index registered 47.3 percent in May compared to 46.7 percent in April, an increase of 0.6 percentage point. An Employment Index above 47.6 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment. Industries reporting growth in employment are: Primary Metals; Furniture; Transportation & Equipment; Printing & Publishing; Rubber & Plastic Products; Chemicals; Fabricated Metals; and Textiles.

Employment	% Higher	% Same	% Lower	Net	Index
May 2002	18	65	17	+1	47.3
April 2002	16	64	20	-4	46.7
March 2002	17	62	21	-4	47.5
February 2002	9	68	23	-14	43.8

Supplier Deliveries

ISM's Supplier Deliveries Index indicates delivery performance is slower (a reading above 50 percent indicates slower deliveries). At 53.9 percent, the Index is 0.2 percentage point higher than April's 53.7 percent. The industries reporting slower supplier deliveries in May are: Apparel; Fabricated Metals; Furniture; Instruments & Photographic Equipment; Textiles; Electronic Components & Equipment; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Industrial & Commercial Equipment & Computers; and Chemicals.

Supplier Deliveries	% Slower	% Same	% Faster	Net	Index
May 2002	13	82	5	+8	53.9
April 2002	10	87	3	+7	53.7
March 2002	10	84	6	+4	53.1
February 2002	9	85	6	+3	52.3

NOTE: A list of commodities in short supply is available at the end of this report.

Inventories

The rate of liquidation of manufacturers' inventories decelerated again in May as the Inventories Index registered 45.6 percent compared to the 42.9 percent reported in April. The Inventories Index has been under 50 percent for 28 consecutive months. An Inventories Index greater than 41.3 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis' (BEA) figures on overall manufacturing inventories (in constant 1987 dollars). Four industries reported higher inventories in May: Textiles; Primary Metals; Chemicals; and Fabricated Metals.

Inventories	% Higher	% Same	% Lower	Net	Index
May 2002	14	61	25	-11	45.6
April 2002	13	61	26	-13	42.9
March 2002	11	63	26	-15	41.2
February 2002	10	64	26	-16	39.5

Customers's Inventories

The Customers' Inventories Index is at 39 percent, down from 40.5 percent reported in April. Respondents indicate that their customers do not have sufficient inventories on hand at this time. This is the 12th consecutive month that the index has registered below 50. There were no reports of excessive customers' inventories in May.

Customer Inventories	% Reporting	% Too High	% About Right	% Too Low	Net	Index
May 2002	85	4	70	26	-22	39.0
April 2002	86	8	65	27	-19	40.5
March 2002	87	7	66	27	-20	40.0
February 2002	88	8	67	25	-17	41.5

Prices

ISM's Prices Index indicates manufacturers paid higher prices in May. This is the third month the Index has registered higher prices. With the Index at 63 percent, it is 2.7 percentage points higher than April's 60.3 percent. In May, 38 percent of supply executives reported paying higher prices and 8 percent reported paying lower prices, while 54 percent reported that prices were unchanged from the preceding month.

A Prices Index below 46.6 percent, over time, is generally consistent with a decrease in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices. The industries reporting paying higher prices for May are: Petroleum; Primary Metals; Glass, Stone & Aggregate; Rubber & Plastic Products; Fabricated Metals; Tobacco; Instruments & Photographic Equipment; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Chemicals; Paper; Furniture; Transportation & Equipment; Wood & Wood Products; Industrial & Commercial Equipment & Computers; Food; Electronic Components & Equipment; and Textiles.

Prices	% Higher	% Same	% Lower	Net	Index
May 2002	38	54	8	+30	63.0
April 2002	36	53	11	+25	60.3
March 2002	18	66	16	+2	51.9
February 2002	9	65	26	-17	41.5

NOTE: A list of commodities up in price and down in price is available at the end of this report.

Backlog of Orders

ISM's Backlog of Orders Index (not seasonally adjusted) registered 56.5 percent, indicating a faster rate of growth in manufacturers' backlogs as the Index rose 0.5 percentage point from April's report of 56 percent. Of the 89 percent of respondents who measure their backlog of orders, 29 percent reported greater backlogs, 16 percent reported smaller backlogs, and 55 percent reported no change from April. The industries reporting an increase in order backlog during the month are: Petroleum; Furniture; Glass, Stone & Aggregate; Textiles; Paper; Electronic Components & Equipment; Transportation & Equipment; Wood & Wood Products; Rubber & Plastic Products; Primary Metals; and Chemicals.

Backlog of Orders	% Reporting	% Greater	% Same	% Less	Net	Index
May 2002	89	29	55	16	+13	56.5
April 2002	87	27	58	15	+12	56.0
March 2002	87	35	55	10	+25	62.5
February 2002	88	23	60	17	+6	53.0

New Export Orders

ISM's New Export Orders Index for May registered 53.3 percent, an increase of 1.4 percentage points when compared to April's index of 51.9 percent. This is the fifth consecutive month of growth for New Export Orders. The industries reporting growth in new export orders in May are: Wood & Wood Products; Textiles; Furniture; Transportation & Equipment; Printing & Publishing; Chemicals; Fabricated Metals; Industrial & Commercial Equipment & Computers; Electronic Components & Equipment; and Rubber & Plastic Products.

New Export Orders	% Exporting	% Better	% Same	% Worse	Net	Index
May 2002	76	15	77	8	+7	53.3
April 2002	77	15	76	9	+6	51.9
March 2002	76	13	77	10	+3	51.0
February 2002	74	11	78	11	0	51.1

Imports

Imports of materials by manufacturers continued to grow in May as the Imports Index registered 53.6 percent. The May Index indicates a slower rate of growth as evidenced by the 2.1 percentage points decline when compared to 55.7 percent in April. The eight industries reporting growth in import activity for May are: Wood & Wood Products; Furniture; Transportation & Equipment; Fabricated Metals; Industrial & Commercial Equipment & Computers; Electronic Components & Equipment; Food; and Printing & Publishing.

Imports	% Importing	% Higher	% Same	% Lower	Net	Index
May 2002	77	18	75	7	+11	53.6
April 2002	76	19	75	6	+13	55.7
March 2002	75	15	80	5	+10	53.4
February 2002	75	10	81	9	+1	52.0

Buying Policy

Average commitment leadtime for Capital Expenditures rose 3 days to 94 days. Average leadtime for Production Materials declined 1 day to 49 days. Average leadtime for Maintenance, Repair, and Operating (MRO) supplies was unchanged at 20 days.

Percent Reporting
	Hand to Mouth	30 Days	60 Days	90 Days	6 Mos.	1 Year+	Avg. Days
Capital Expenditures
May 2002	26	4	17	26	22	5	94
April 2002	23	12	14	25	21	5	91
March 2002	24	6	18	24	23	5	95
February 2002	25	8	16	21	23	7	99
Production Materials
May 2002	21	45	18	10	4	2	49
April 2002	18	46	19	11	4	2	50
March 2002	22	48	17	7	4	2	46
February 2002	25	47	17	7	2	2	43
MRO Supplies
May 2002	55	36	7	1	1	0	20
April 2002	56	34	8	2	0	0	20
March 2002	55	33	8	3	1	0	22
February 2002	53	35	10	2	0	0	21

In Short Supply

Steel (third month) is the only commodity reported in short supply.

Up in Price

Aluminum — 4th month; High Density Polyethylene — 2nd month; Natural Gas — 3rd month; Paper — 2nd month ; Plastic Film; Polyethylene — 2nd month; Resins — 2nd month; Steel — 4th month; Steel – Cold Rolled; Steel – Flat Rolled.

Down in Price

Caustic Soda — 13th month; Corrugated Containers — 16th month; Packaging.

Data and Method of Presentation

The Manufacturing ISM Report On Business® is based on data compiled from monthly replies to questions asked of purchasing and supply executives in over 400 industrial companies. Membership of the Business Survey Committee is diversified by Standard Industrial Classification (SIC) category, based on each industry's contribution to Gross Domestic Product (GDP). Twenty industries from various U.S. geographical areas are represented on the committee.

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 is then seasonally adjusted to allow for the effects of repetitive intrayear variations resulting primarily from normal differences in weather conditions, various institutional arrangements, and differences attributable to nonmoveable 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 indices for five of the indicators with varying weights: New Orders – 30%; Production – 25%; Employment – 20%; Supplier Deliveries – 15%; and Inventories – 10%.

Diffusion indices 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 that it is generally declining. A PMI over 42.7 percent, over a period of time, indicates that the overall economy, or Gross Domestic Product (GDP), is generally expanding; below 42.7 percent, it is generally declining. The distance from 50 percent or 42.7 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 leadtime, 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.

TThe Manufacturing ISM Report On Business® is published monthly by the Institute for Supply Management™. 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. In June 2001 the membership of NAPM voted to change the association's name from the National Association of Purchasing Management to the Institute for Supply Management™ to reflect the increasing strategic and global significance of supply management. For further information, see the ISM Web site at www.ism.ws. The 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 2002 data will be released at 10:00 a.m. (ET) on July 1, 2002.

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