FOR RELEASE: October 1, 2004

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

PMI at 58.5%

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 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 September 2004.

(Tempe, Arizona) — Economic activity in the manufacturing sector grew in September for the 16th consecutive month, while the overall economy grew for the 35th 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. "The manufacturing sector continued to grow during September, but at a slightly slower rate. Both new orders and production remain strong, and employment growth accelerated."

The ISM Prices Index still indicates that there is significant upward pressure on prices. ISM's Customers' Inventories Index indicates that customer inventories are too low at this time. The Backlog of Orders Index indicates that order backlogs increased in September. The New Export Orders and Imports Indexes continued to grow in September.

Comments from respondents this month were typical of a growing manufacturing sector. Concerns range from problems with product launches to seasonal issues and strikes. The hurricanes caused problems for some businesses while others saw a pickup in demand. The employment picture is improving according to the respondents as they mention both blue-collar and white-collar new hires. The growth in inventories appears to be voluntary as companies build inventories for "stocking of finished goods for resale," for "hedging against price increases," and, as one member responded simply, "more business, more inventory."

ISM's PMI registered 58.5 percent in September, a decrease of 0.5 percentage point when compared to 59 percent in August. ISM's New Orders Index declined 3.1 percentage points from 61.2 percent in August to 58.1 percent in September. ISM's Production Index increased 2.1 percentage points from 59.5 percent in August to 61.6 percent in September. The ISM Employment Index is at 58.1 percent for September, an increase of 2.4 percentage points when compared to the 55.7 percent reported in August.

ISM's Supplier Deliveries Index registered 59.6 percent, 3.6 percentage points lower than August's 63.2 percent. ISM's Inventories Index registered 51 percent in September, down from the 51.7 percent reported in August. ISM's Customers' Inventories Index for September is at 41.5 percent, a decrease of 4 percentage points compared to the August reading of 45.5 percent. ISM's Prices Index in September is 76 percent, 5.5 percentage points lower than the 81.5 percent reported in August.

ISM's Backlog of Orders Index for September, at 55 percent, was unchanged from the August reading. ISM's New Export Orders Index registered 51.8 percent, a decrease of 2.4 percentage points from August's 54.2 percent. ISM's Imports Index decreased 3.4 percentage points to 55.8 percent in September, down from 59.2 percent in August.

"September was surprisingly strong given the recent slowing of growth in new orders. Production and employment were particularly encouraging as both indexes increased when compared to August. Any concern over inventory growth would seem to be offset by the decline in customer inventories," said Ore.

In September, 15 industries reported growth: Miscellaneous*; Glass, Stone & Aggregate; Rubber & Plastic Products; Industrial & Commercial Equipment & Computers; Tobacco; Apparel; Transportation & Equipment; Chemicals; Food; Wood & Wood Products; Electronic Components & Equipment; Printing & Publishing; Instruments & Photographic Equipment; Paper; and Fabricated Metals.

"ABS; Alloy; Aluminum; Aluminum Extrusions; Aluminum Products (various forms); Bags; Caustic Soda; Chemicals; Copper Products; Corrugated; Electricity; Energy; Fasteners; Freight; Fuel; Fuel Oil; Gasoline; HDPE; Latex; Lumber; Metals; Natural Gas; Oil; Packaging; Paper; Plastic Products (various forms); Plastic Resins; Plastics; Polyethylene; Polyethylene Resin; Polypropylene; Polypropylene Resin; Propylene Glycol; Resin; Stainless Steel; Stainless Steel Products (various forms); Steel; Steel Products (various forms); and Transportation are the commodities reported up in price. The commodities reported down in price are Corn and Natural Gas (also reported up in price). The commodities listed in short supply are Benzene; Caustic Soda; Chemicals; Stainless Steel; Steel; and Steel Products (various forms)," Ore stated.

SEPTEMBER 2004 ISM BUSINESS SURVEY AT A GLANCE

	Series Index	Direction September vs August	Rate of Change September vs August
PMI	58.5	Growing	Slower
New Orders	58.1	Growing	Slower
Production	61.6	Growing	Faster
Employment	58.1	Growing	Faster
Supplier Deliveries	59.6	Slowing	Slower
Inventories	51.0	Growing	Slower
Customers' Inventories	41.5	Too Low	Faster
Prices	76.0	Increasing	Slower
Backlog of Orders	55.0	Growing	Same
New Export Orders	51.8	Growing	Slower
Imports	55.8	Growing	Slower

THE ECONOMY AT A GLANCE

Overall Economy	Growing	Slower
Manufacturing	Growing	Slower

PMI

The PMI indicates that the manufacturing economy grew in September for the 16th consecutive month. The PMI for September registered 58.5 percent, a 0.5 percentage point decrease when compared to the August reading of 59 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 42.8 percent, over a period of time, generally indicates an expansion of the overall economy. The September PMI indicates that both the overall economy and the manufacturing sector are growing. The past relationship between the PMI and the overall economy indicates that the average PMI for January through September (61.5 percent) corresponds to a 6.8 percent increase in real gross domestic product (GDP). In addition, if the PMI for September (58.5 percent) is annualized, this corresponds to a 5.7 percent increase in GDP.

Month	Sep'04	Aug'04	Jul'04	Jun'04	May'04
PMI%	58.5	59.0	62.0	61.1	62.8
Month	Apr'04	Mar'04	Feb'04	Jan'04	Dec'03
PMI%	62.4	62.5	61.4	63.6	63.4
Month	Nov'03	Oct'03	Sep'03	Aug'03	Jul'03
PMI%	61.3	57.1	54.7	55.0	52.6

New Orders

ISM's New Orders Index grew in September with a reading of 58.1 percent. The index is 3.1 percentage points lower than the 61.2 percent registered in August, and it is the 17th consecutive month the index has exceeded 50 percent. A New Orders Index above 51 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 1987 dollars). Eleven industries reported increases for the month of September: Glass, Stone & Aggregate; Rubber & Plastic Products; Miscellaneous*; Industrial & Commercial Equipment & Computers; Apparel; Chemicals; Food; Transportation & Equipment; Wood & Wood Products; Printing & Publishing; and Electronic Components & Equipment.

New Orders	%Better	%Same	%Worse	Net	Index
September 2004	31	54	15	+16	58.1
August 2004	36	47	17	+19	61.2
July 2004	36	51	13	+23	64.7
June 2004	38	49	13	+25	60.0

Production

ISM's Production Index is 61.6 percent in September, 2.1 percentage points higher than the 59.5 percent reported in August. September is the 17th consecutive month of growth in the index. An index above 49.9 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures. Of the industries reporting in September, 15 registered growth: Tobacco; Glass, Stone & Aggregate; Miscellaneous*; Paper; Industrial & Commercial Equipment & Computers; Electronic Components & Equipment; Chemicals; Transportation & Equipment; Food; Printing & Publishing; Instruments & Photographic Equipment; Furniture; Wood & Wood Products; Rubber & Plastic Products; and Fabricated Metals.

Production	%Better	%Same	%Worse	Net	Index
September 2004	33	57	10	+23	61.6
August 2004	32	51	17	+15	59.5
July 2004	34	55	11	+23	66.1
June 2004	40	49	11	+29	63.2

Employment

ISM's Employment Index grew for the 11th consecutive month, following a 37-month trend of contraction. The index registered 58.1 percent in September compared to 55.7 percent in August, an increase of 2.4 percentage points. An Employment Index above 48 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment. The 11 industries reporting growth in employment during September are: Miscellaneous*; Rubber & Plastic Products; Industrial & Commercial Equipment & Computers; Transportation & Equipment; Printing & Publishing; Glass, Stone & Aggregate; Fabricated Metals; Wood & Wood Products; Food; Electronic Components & Equipment; and Instruments & Photographic Equipment.

Employment	%Higher	%Same	%Lower	Net	Index
September 2004	26	60	14	+12	58.1
August 2004	24	61	15	+9	55.7
July 2004	25	65	10	+15	57.3
June 2004	35	56	9	+26	59.7

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower for the 33rd consecutive month in September. ISM's Supplier Deliveries Index for September registered 59.6 percent, a decrease of 3.6 percentage points compared to August's reading of 63.2 percent. A reading above 50 percent indicates slower deliveries. The 13 industries reporting slower supplier deliveries in September are: Apparel; Miscellaneous*; Wood & Wood Products; Rubber & Plastic Products; Transportation & Equipment; Chemicals; Paper; Instruments & Photographic Equipment; Fabricated Metals; Printing & Publishing; Industrial & Commercial Equipment & Computers; Food; and Electronic Components & Equipment.

Supplier Deliveries	%Slower	%Same	%Faster	Net	Index
September 2004	23	73	4	+19	59.6
August 2004	31	66	3	+28	63.2
July 2004	35	61	4	+31	64.2
June 2004	39	58	3	+36	68.1

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

Inventories

Manufacturers' inventories grew in September for the second consecutive month as ISM's Inventories Index registered 51 percent, a decrease of 0.7 percentage point when compared to August's 51.7 percent. An Inventories Index greater than 42.3 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis' (BEA) figures on overall manufacturing inventories (in constant 1987 dollars). The 11 industries reporting higher inventories in September are: Instruments & Photographic Equipment; Paper; Glass, Stone & Aggregate; Furniture; Wood & Wood Products; Rubber & Plastic Products; Printing & Publishing; Fabricated Metals; Electronic Components & Equipment; Transportation & Equipment; and Food.

Inventories	%Higher	%Same	%Lower	Net	Index
September 2004	20	63	17	+3	51.0
August 2004	23	61	16	+7	51.7
July 2004	17	63	20	-3	49.9
June 2004	20	62	18	+2	51.1

Customers' Inventories**

The September Customers' Inventories Index is at 41.5 percent, a decrease of 4 percentage points compared to the August reading of 45.5 percent. Respondents indicate that their customers do not have sufficient inventories on hand at this time. This is the 40th consecutive month that the index has registered below 50 percent. Three industries reported higher customer inventories during September and they are: Instruments & Photographic Equipment; Food; and Primary Metals.

Customers' Inventories	%Reporting	% Too High	% About Right	% Too Low	Net	Index
September 2004	71	8	67	25	-17	41.5
August 2004	73	11	69	20	-9	45.5
July 2004	76	6	63	31	-25	37.5
June 2004	72	8	62	30	-22	39.0

Prices**

ISM's Prices Index indicates manufacturers continued to pay higher prices in September, but at a slower rate. This is the 31st consecutive month the index has registered higher prices. September's index is at 76 percent, 5.5 percentage points lower than August's reading of 81.5 percent. During September, 55 percent of supply executives reported paying higher prices and 3 percent reported paying lower prices, while 42 percent reported that prices were unchanged from the preceding month.

A Prices Index below 46.9 percent, over time, is generally consistent with a decrease in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices. Nineteen industries reported paying higher prices in September: Tobacco; Wood & Wood Products; Printing & Publishing; Petroleum; Furniture; Rubber & Plastic Products; Primary Metals; Paper; Textiles; Industrial & Commercial Equipment & Computers; Glass, Stone & Aggregate; Fabricated Metals; Transportation & Equipment; Instruments & Photographic Equipment; Food; Electronic Components & Equipment; Apparel; Chemicals; and Miscellaneous*.

Prices	%Higher	%Same	%Lower	Net	Index
September 2004	55	42	3	+52	76.0
August 2004	67	29	4	+63	81.5
July 2004	58	38	4	+54	77.0
June 2004	66	30	4	+62	81.0

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 registered 55 percent, indicating manufacturers' backlogs in September grew at the same rate when compared to August. Of the 89 percent of respondents who report their backlog of orders, 28 percent reported greater backlogs, 18 percent reported smaller backlogs, and 54 percent reported no change from August. The 11 industries reporting an increase in order backlogs during the month are: Industrial & Commercial Equipment & Computers; Rubber & Plastic Products; Miscellaneous*; Wood & Wood Products; Paper; Transportation & Equipment; Chemicals; Fabricated Metals; Instruments & Photographic Equipment; Electronic Components & Equipment; and Furniture.

Backlog of Orders	%Reporting	%Greater	%Same	%Less	Net	Index
September 2004	89	28	54	18	+10	55.0
August 2004	89	29	52	19	+10	55.0
July 2004	87	32	52	16	+16	58.0
June 2004	88	31	55	14	+17	58.5

New Export Orders

ISM's New Export Orders Index for September registered 51.8 percent, a decrease of 2.4 percentage points when compared to August's index of 54.2 percent. This is the 22nd consecutive month of growth in export orders. The eight industries reporting growth in new export orders in September are: Primary Metals; Miscellaneous*; Chemicals; Textiles; Industrial & Commercial Equipment & Computers; Food; Fabricated Metals; and Paper.

New Export Orders	%Reporting	%Better	%Same	%Worse	Net	Index
September 2004	78	12	81	7	+5	51.8
August 2004	76	19	72	9	+10	54.2
July 2004	77	19	75	6	+13	56.2
June 2004	77	24	70	6	+18	56.7

Imports

Imports of materials by manufacturers grew during September as the Imports Index registered 55.8 percent. The index declined 3.4 percentage points when compared to August's index of 59.2 percent, indicating a slower rate of growth. The 12 industries reporting growth in import activity for September are: Furniture; Printing & Publishing; Glass, Stone & Aggregate; Wood & Wood Products; Transportation & Equipment; Fabricated Metals; Instruments & Photographic Equipment; Primary Metals; Industrial & Commercial Equipment & Computers; Miscellaneous*; Food; and Chemicals.

Imports	%Reporting	%Higher	%Same	%Lower	Net	Index
September 2004	79	23	72	5	+18	55.8
August 2004	78	23	71	6	+17	59.2
July 2004	79	23	72	5	+18	59.9
June 2004	78	22	74	4	+18	57.6

*Miscellaneous is a preponderance of jewelry, toys, sporting goods and musical instruments.

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

Buying Policy

Average commitment leadtime for Capital Expenditures rose 14 days to 110 days. Average leadtime for Production Materials increased 1 day to 47 days. Average leadtime for Maintenance, Repair, and Operating (MRO) supplies decreased 3 days to 20 days.

	Percent Reporting
	Hand to Mouth	30 Days	60 Days	90 Days	6 Mos.	1 Year+	Avg. Days
Capital Expenditures
September 2004	23	8	15	18	27	9	110
August 2004	26	11	13	21	22	7	96
July 2004	24	8	14	21	25	8	105
June 2004	23	9	16	20	23	9	105
Production Materials
September 2004	24	39	22	11	2	2	47
August 2004	24	39	22	10	4	1	46
July 2004	20	45	21	10	3	1	45
June 2004	25	40	20	11	3	1	44
MRO Supplies
September 2004	58	31	10	0	1	0	20
August 2004	52	36	8	3	1	0	23
July 2004	53	36	8	2	1	0	22
June 2004	51	38	9	1	1	0	22

In Short Supply

Benzene; Caustic Soda; Chemicals — 2nd month; Stainless Steel — 9th month; Steel — 9th month; and Steel Products (various forms) — 3rd month.

Up in Price

ABS; Alloy — 2nd month; Aluminum — 11th month; Aluminum Extrusions — 2nd month; Aluminum Products (various forms); Bags; Caustic Soda — 5th month; Chemicals — 8th month; Copper Products — 2nd month; Corrugated — 8th month; Electricity; Energy — 9th month; Fasteners; Freight — 7th month; Fuel; Fuel Oil — 9th month; Gasoline — 9th month; HDPE; Latex — 2nd month; Lumber — 5th month; Metals; Natural Gas* — 26th month; Oil; Packaging — 4th month; Paper — 7th month; Plastic Products (various forms) — 8th month; Plastic Resins — 2nd month; Plastics — 2nd month; Polyethylene; Polyethylene Resin; Polypropylene — 2nd month; Polypropylene Resin; Propylene Glycol; Resin — 2nd month; Stainless Steel; Stainless Steel Products (various forms) — 3rd month; Steel — 12th month; Steel Products (various forms) — 2nd month; and Transportation.

Down in Price

Corn — 2nd month; and Natural Gas* — 3rd month.

*Reported as both up and down in price.

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 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. The 20 manufacturing Standard Industry Classification codes are: Food; Tobacco; Textiles; Apparel; Wood & Wood Products; Furniture; Paper; Printing & Publishing; Chemicals; Petroleum; Rubber & Plastic Products; Leather; Glass, Stone & Aggregate; Primary Metals; Fabricated Metals; Industrial & Commercial Equipment & Computers; Electronic Components & Equipment; Transportation & Equipment; Instruments & Photographic Equipment; and Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments).

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 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 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 42.8 percent, over a period of time, indicates that the overall economy, or Gross Domestic Product (GDP), is generally expanding; below 42.8 percent, it is generally declining. The distance from 50 percent or 42.8 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.

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 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. 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 October 2004 data will be released at 10:00 a.m. (ET) on November 1, 2004.

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