FOR RELEASE: January 4, 2010

Contact:

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

PMI at 55.9%

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 December 2009.

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

(Tempe, Arizona) — Economic activity in the manufacturing sector expanded in December for the fifth consecutive month, and the overall economy grew for the eighth 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, CPSM, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The manufacturing sector grew for the fifth consecutive month in December as the PMI rose to 55.9 percent, its highest reading since April 2006 when it registered 56 percent. This month's report is quite strong as both the New Orders and Production Indexes are above 60 percent. The sector may be benefiting from an excessive destocking cycle as indicated by the recent performance of the Customers' Inventories Index. Customers' inventories have been 'too low' for nine consecutive months, and this month's index is the lowest reading since the inception of the index in January 1997. Overall, the recovery in manufacturing is continuing, but there are still some industries mired in the downturn as evidenced by the seven industries still in decline."

PERFORMANCE BY INDUSTRY

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

WHAT RESPONDENTS ARE SAYING ...

• "Capital is tight. The forecast has been lowered for 2010." (Chemical Products)
• "Nice rebound for our consumer business." (Nonmetallic Mineral Products)
• "Demand from automotive [manufacturers] remains strong, with some plants not having extended shutdowns during the Christmas holiday." (Fabricated Metal Products)
• "Still not seeing any increase in production as the economic indicators are suggesting." (Electrical Equipment, Appliances & Components)
• "Business remains steady and strong." (Primary Metals)

MANUFACTURING AT A GLANCE DECEMBER 2009
Index	Series Index December	Series Index November	Percentage Point Change	Direction	Rate of Change	Trend* (Months)
PMI	55.9	53.6	+2.3	Growing	Faster	5
New Orders	65.5	60.3	+5.2	Growing	Faster	6
Production	61.8	59.9	+1.9	Growing	Faster	7
Employment	52.0	50.8	+1.2	Growing	Faster	3
Supplier Deliveries	56.6	55.7	+0.9	Slowing	Faster	7
Inventories	43.4	41.3	+2.1	Contracting	Slower	44
Customers' Inventories	35.0	37.0	-2.0	Too Low	Faster	9
Prices	61.5	55.0	+6.5	Increasing	Faster	6
Backlog of Orders	50.0	52.0	-2.0	Unchanged	From Growing	1
Exports	54.5	56.0	-1.5	Growing	Slower	6
Imports	55.0	51.5	+3.5	Growing	Faster	4
OVERALL ECONOMY				Growing	Faster	8
Manufacturing Sector				Growing	Faster	5

*Number of months moving in current direction.

COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price

Aluminum (6); Aluminum Products; Copper (7); Copper Based Products (6); Polypropylene; and Steel (6).

Commodities Down in Price

Natural Gas is the only commodity reported down in price.

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.

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DECEMBER 2009 MANUFACTURING INDEX SUMMARIES

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PMI

Manufacturing growth accelerated in December as the PMI registered 55.9 percent, an increase of 2.3 percentage points when compared to November's reading of 53.6 percent, indicating continuing recovery in the sector at a faster rate of growth. This is the fifth consecutive month of growth 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 for the eighth consecutive month in the overall economy, as well as expansion in the manufacturing sector for the fifth consecutive month. Ore stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through December (46.3 percent) corresponds to a 1.6 percent increase in real gross domestic product (GDP). However, if the PMI for December (55.9 percent) is annualized, it corresponds to a 4.6 percent increase in real GDP annually."

THE LAST 12 MONTHS

Month	PMI		Month	PMI
Dec 2009	55.9		Jun 2009	44.8
Nov 2009	53.6		May 2009	42.8
Oct 2009	55.7		Apr 2009	40.1
Sep 2009	52.6		Mar 2009	36.3
Aug 2009	52.9		Feb 2009	35.8
Jul 2009	48.9		Jan 2009	35.6
Average for 12 months – 46.3 High – 55.9 Low – 35.6

New Orders

ISM's New Orders Index registered 65.5 percent in December, 5.2 percentage points higher than the 60.3 percent registered in November. This is the sixth consecutive month of growth in the New Orders Index. 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 11 industries reporting growth in new orders in December — listed in order — are: Apparel, Leather & Allied Products; Computer & Electronic Products; Textile Mills; Electrical Equipment, Appliances & Components; Paper Products; Primary Metals; Furniture & Related Products; Food, Beverage & Tobacco Products; Machinery; Transportation Equipment; and Fabricated Metal Products. The four industries reporting decreases in new orders in December are: Wood Products; Plastics & Rubber Products; Nonmetallic Mineral Products; and Chemical Products.

New Orders	% Better	% Same	% Worse	Net	Index
Dec 2009	35	46	19	+16	65.5
Nov 2009	36	42	22	+14	60.3
Oct 2009	34	42	24	+10	58.5
Sep 2009	42	38	20	+22	60.8

Production

ISM's Production Index registered 61.8 percent in December, which is an increase of 1.9 percentage points from the November reading of 59.9 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 seventh consecutive month the Production Index has registered above 50 percent.

The 11 industries reporting growth in production during the month of December — listed in order — are: Textile Mills; Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Primary Metals; Furniture & Related Products; Computer & Electronic Products; Machinery; Paper Products; Transportation Equipment; and Fabricated Metal Products. The five industries reporting decreases in production in December are: Wood Products; Miscellaneous Manufacturing; Plastics & Rubber Products; Nonmetallic Mineral Products; and Chemical Products.

Production	% Better	% Same	% Worse	Net	Index
Dec 2009	26	58	16	+10	61.8
Nov 2009	33	50	17	+16	59.9
Oct 2009	37	48	15	+22	63.3
Sep 2009	36	46	18	+18	55.7

Employment

ISM's Employment Index registered 52 percent in December, which is 1.2 percentage points higher than the 50.8 percent reported in November. This is the third month of growth in manufacturing employment, following 14 consecutive months of decline. 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.

Seven of the 18 manufacturing industries reported growth in employment in December in the following order: Apparel, Leather & Allied Products; Printing & Related Support Activities; Petroleum & Coal Products; Paper Products; Transportation Equipment; Machinery; and Electrical Equipment, Appliances & Components. The eight industries that reported decreases in employment during December — listed in order — are: Wood Products; Textile Mills; Miscellaneous Manufacturing; Nonmetallic Mineral Products; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Chemical Products; and Fabricated Metal Products.

Employment	% Higher	% Same	% Lower	Net	Index
Dec 2009	17	65	18	-1	52.0
Nov 2009	17	65	18	-1	50.8
Oct 2009	20	64	16	+4	53.1
Sep 2009	15	62	23	-8	46.2

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower in December as the Supplier Deliveries Index registered 56.6 percent, which is 0.9 percentage point higher than the 55.7 percent registered in November. This is the seventh consecutive month the Supplier Deliveries Index has been above 50 percent. A reading above 50 percent indicates slower deliveries.

The five industries reporting slower supplier deliveries in December are: Petroleum & Coal Products; Computer & Electronic Products; Machinery; Transportation Equipment; and Electrical Equipment, Appliances & Components. The two industries reporting faster deliveries in December are: Primary Metals; and Food, Beverage & Tobacco Products.

Supplier Deliveries	% Slower	% Same	% Faster	Net	Index
Dec 2009	16	78	6	+10	56.6
Nov 2009	15	80	5	+10	55.7
Oct 2009	15	83	2	+13	56.9
Sep 2009	24	71	5	+19	58.0

Inventories

Manufacturers' inventories contracted at a slower rate in December as the Inventories Index registered 43.4 percent. The index is 2.1 percentage points higher than the November reading of 41.3 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).

The six industries reporting higher inventories in December — listed in order — are: Apparel, Leather & Allied Products; Petroleum & Coal Products; Plastics & Rubber Products; Transportation Equipment; Machinery; and Computer & Electronic Products. The nine industries that reported decreases in inventories in December — listed in order — are: Printing & Related Support Activities; Nonmetallic Mineral Products; Textile Mills; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Primary Metals; Fabricated Metal Products; Chemical Products; and Food, Beverage & Tobacco Products.

Inventories	% Higher	% Same	% Lower	Net	Index
Dec 2009	13	57	30	-17	43.4
Nov 2009	8	63	29	-21	41.3
Oct 2009	19	55	26	-7	46.9
Sep 2009	14	55	31	-17	42.5

Customers' Inventories*

The ISM Customers' Inventories Index registered 35 percent in December, which is slightly lower than in November when the index registered 37 percent. The index indicates that respondents believe their customers' inventories are too low at this time. This is the ninth consecutive month the Customers' Inventories Index has been below 50 percent.

Furniture & Related Products is the only industry reporting higher customers' inventories during December. The 13 industries that reported lower customers' inventories during December — listed in order — are: Wood Products; Machinery; Nonmetallic Mineral Products; Plastics & Rubber Products; Transportation Equipment; Primary Metals; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Paper Products; Chemical Products; Food, Beverage & Tobacco Products; and Fabricated Metal Products.

Customers' Inventories	% Reporting	%Too High	%About Right	%Too Low	Net	Index
Dec 2009	73	7	56	37	-30	35.0
Nov 2009	75	7	60	33	-26	37.0
Oct 2009	75	7	63	30	-23	38.5
Sep 2009	71	9	60	31	-22	39.0

Prices*

The ISM Prices Index registered 61.5 percent in December, 6.5 percentage points higher than the 55 percent reported in November. This is the sixth consecutive month that the Prices Index has registered above 50 percent. While 32 percent of respondents reported paying higher prices and 9 percent reported paying lower prices, 59 percent of supply executives reported paying the same prices as in November. 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.

The 12 industries reporting paying increased prices during the month of December — listed in order — are: Petroleum & Coal Products; Plastics & Rubber Products; Primary Metals; Textile Mills; Paper Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Machinery; Computer & Electronic Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Fabricated Metal Products. Nonmetallic Mineral Products and Chemical Products are the only industries that reported paying lower prices during December.

Prices	% Higher	% Same	% Lower	Net	Index
Dec 2009	32	59	9	+23	61.5
Nov 2009	20	70	10	+10	55.0
Oct 2009	37	56	7	+30	65.0
Sep 2009	36	55	9	+27	63.5

Backlog of Orders*

ISM's Backlog of Orders Index registered 50 percent in December, 2 percentage points lower than the 52 percent reported in November. Of the 86 percent of respondents who reported their backlog of orders, 24 percent reported greater backlogs, 24 percent reported smaller backlogs, and 52 percent reported no change from November.

The nine industries reporting increased order backlogs in December — listed in order — are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Primary Metals; Furniture & Related Products; Paper Products; and Machinery. The six industries that reported decreases in order backlogs during December — listed in order — are: Printing & Related Support Activities; Wood Products; Miscellaneous Manufacturing; Fabricated Metal Products; Chemical Products; and Transportation Equipment.

Backlog of Orders	% Reporting	% Greater	% Same	% Less	Net	Index
Dec 2009	86	24	52	24	0	50.0
Nov 2009	85	23	58	19	+4	52.0
Oct 2009	81	27	53	20	+7	53.5
Sep 2009	82	25	57	18	+7	53.5

New Export Orders*

ISM's New Export Orders Index registered 54.5 percent in December, 1.5 percentage points lower than the 56 percent reported in November. This is the sixth consecutive month of growth in the New Export Orders Index, following nine consecutive months of contraction.

The seven industries reporting growth in new export orders in December — listed in order — are: Apparel, Leather & Allied Products; Paper Products; Plastics & Rubber Products; Fabricated Metal Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; and Electrical Equipment, Appliances & Components. The three industries reporting decreases in new export orders in December are: Miscellaneous Manufacturing; Transportation Equipment; and Chemical Products.

New Export Orders	% Reporting	% Higher	% Same	% Lower	Net	Index
Dec 2009	78	19	71	10	+9	54.5
Nov 2009	79	22	68	10	+12	56.0
Oct 2009	75	24	63	13	+11	55.5
Sep 2009	75	20	70	10	+10	55.0

Imports*

Imports of materials by manufacturers expanded in December as the Imports Index registered 55 percent, 3.5 percentage points higher than the 51.5 percent reported in November.

The eight industries reporting growth in imports during the month of December — listed in order — are: Nonmetallic Mineral Products; Apparel, Leather & Allied Products; Machinery; Paper Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Computer & Electronic Products; and Fabricated Metal Products. The four industries that reported decreases in imports in December are: Petroleum & Coal Products; Miscellaneous Manufacturing; Chemical Products; and Food, Beverage & Tobacco Products.

Imports	% Reporting	% Higher	% Same	% Lower	Net	Index
Dec 2009	83	20	70	10	+10	55.0
Nov 2009	81	12	79	9	+3	51.5
Oct 2009	82	14	74	12	+2	51.0
Sep 2009	80	13	78	9	+4	52.0

* 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 8 days to 110 days. Average lead time for Production Materials increased 2 days to 51 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies decreased 1 day to 21 days.

Percent Reporting
Capital Expenditures	Hand- to- Mouth	30 Days	60 Days	90 Days	6 Months	1 Year+	Average Days
Dec 2009	31	7	8	21	20	13	110
Nov 2009	35	6	10	13	27	9	102
Oct 2009	34	7	10	15	24	10	103
Sep 2009	30	8	15	16	22	9	99
Production Materials	Hand- to- Mouth	30 Days	60 Days	90 Days	6 Months	1 Year+	Average Days
Dec 2009	26	40	20	6	5	3	51
Nov 2009	26	36	24	8	4	2	48
Oct 2009	25	40	26	6	2	1	41
Sep 2009	28	37	19	11	3	2	46
MRO Supplies	Hand- to- Mouth	30 Days	60 Days	90 Days	6 Months	1 Year+	Average Days
Dec 2009	54	33	12	1	0	0	21
Nov 2009	56	29	12	2	1	0	22
Oct 2009	54	32	12	2	0	0	21
Sep 2009	55	28	12	5	0	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 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 January 2010 data will be released at 10:00 a.m. (ET) on Monday, February 1, 2010.

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