FOR RELEASE: February 3, 2003

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

PMI at 53.9%

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 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 January 2003.

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

(Tempe, Arizona) — Economic activity in the manufacturing sector grew for the third consecutive month. The overall economy grew for the 15th 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 its growth trend in January, though the rate of growth slowed when compared to December. It is encouraging that New Orders continued strong in January. Production also fared well, providing cause for optimism for an improving economy in the first quarter."

ISM's Backlog of Orders Index indicates that order backlogs declined for the seventh consecutive month. ISM's Supplier Deliveries Index reflects slower deliveries for the 13th consecutive month. Manufacturing employment continued to decline in January as the index remained below the breakeven point (an index of 50 percent) for the 28th consecutive month. ISM's Prices Index is above 50 percent as manufacturers experienced higher prices for the 11th consecutive month. New Export Orders grew in January for the 13th consecutive month. January's Imports Index grew for the third consecutive month.

Comments from purchasing and supply executives offered some expressions of optimism while still expressing concerns about possible war. Adding to the list of concerns, energy prices are a major factor as oil and natural gas prices are skyrocketing.

ISM's PMI is 53.9 percent in January, a decrease of 1.3 percentage points when compared to 55.2 in December. ISM's New Orders Index declined 3.2 percentage points from 62.9 percent in December to 59.7 percent in January. ISM's Production Index declined 0.3 percentage point from 56.6 percent in December to 56.3 percent in January. The ISM Employment Index is at 47.6 percent for January, a decrease of 0.6 percentage point when compared to the 48.2 percent reported in December.

ISM's Supplier Deliveries Index registered 52.6 percent, the same as in December. ISM's Inventories Index declined to 45.4 percent from 46.2 percent in December. ISM's Customers' Inventories Index for January is at 42.5 percent, a decrease of 0.5 percentage point compared to the December reading of 43.0 percent. ISM's Prices Index in January is 57.5 percent, an increase of 0.6 percentage point from December's 56.9 percent. ISM's Backlog of Orders Index declined 1.5 percentage points from 46.5 percent in December to 45 percent in January.

ISM's New Export Orders Index registered 55.6 percent, up 3.1 percentage points from December's 52.5 percent. ISM's Imports Index rose from 54.8 percent in December to 59 percent in January.

"Overall, the signs are still positive for the first quarter. The strength in new orders is encouraging as both domestic and export orders are growing. Customers' Inventories remain low and provide prospects for continuing strength in New Orders," said Ore.

Of the 20 industries in the manufacturing sector, nine industries reported growth: Apparel; Transportation & Equipment; Furniture; Food; Chemicals; Electronic Components & Equipment; Fabricated Metals; Industrial & Commercial Equipment & Computers; and Primary Metals.

"There were no reports of commodities in short supply. Commodities reported up in price are: #2 Fuel Oil, Caustic Soda, Chemicals, Chlorine, Energy, Gasoline, Hydrochloric Acid, Methanol, Natural Gas, Nickel, Oil, Plastic, Resin, and Steel. Commodities reported down in price are: Corrugated, HDPE, and Hot-Rolled Steel Coil," Ore stated.

JANUARY 2003 ISM BUSINESS SURVEY AT A GLANCE

	Series Index	Direction Jan vs Dec	Rate of Change Jan vs Dec
PMI	53.9	Growing	Slower
New Orders	59.7	Growing	Slower
Production	56.3	Growing	Slower
Employment	47.6	Contracting	Faster
Supplier Deliveries	52.6	Slowing	Same Rate
Inventories	45.4	Contracting	Faster
Customers' Inventories	42.5	Too Low	Faster
Prices	57.5	Increasing	Faster
Backlog of Orders	45.0	Contracting	Faster
New Export Orders	55.6	Growing	Faster
Imports	59.0	Growing	Faster

THE ECONOMY AT A GLANCE

Overall Economy	Growing	Slower
Manufacturing	Growing	Slower

PMI

The PMI indicates that the manufacturing economy grew for the third consecutive month in January following one month of decline. With the index at 53.9 percent, this represents a decrease of 1.3 percentage points compared to the December reading of 55.2 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 42.9 percent, over a period of time, generally indicates an expansion of the overall economy. The January 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 PMI for January (53.9 percent) corresponds to a 4.0 percent increase in GDP.

Month	Jan'03	Dec'02	Nov'02	Oct'02	Sep'02
PMI%	53.9	55.2	50.5	49.7	50.7
Month	Aug'02	Jul'02	Jun'02	May'02	Apr'02
PMI%	50.3	50.7	55.2	54.7	53.3
Month	Mar'02	Feb'02	Jan'02	Dec'01	Nov'01
PMI%	54.7	53.8	49.8	48.5	45.7

New Orders

ISM's New Orders Index grew at a slower rate in January with a reading of 59.7 percent. The index is 3.2 percentage points lower than the 62.9 percent registered in December. 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). Industries reporting increases for the month of January are: Apparel; Transportation & Equipment; Food; Fabricated Metals; Industrial & Commercial Equipment & Computers; Chemicals; Furniture; Primary Metals; Electronic Components & Equipment; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); and Paper.

New Orders	%Better	%Same	%Worse	Net	Index
January 2003	33	46	21	+12	59.7
December 2002	33	41	26	+7	62.9
November 2002	22	51	27	-5	52.4
October 2002	23	53	24	-1	52.2

Production

ISM's Production Index is 56.3 percent in January, 0.3 percentage point lower than the 56.6 percent reported in December. This is the 14th consecutive month of growth in production. 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 20 industries reporting in January, the following registered growth: Apparel; Transportation & Equipment; Electronic Components & Equipment; Chemicals; Food; Fabricated Metals; Furniture; Primary Metals; and Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments).

Production	%Better	%Same	%Worse	Net	Index
January	27	51	22	+5	56.3
December 2002	25	54	21	+4	56.6
November 2002	22	60	18	+4	54.9
October 2002	22	56	22	0	51.5

Employment

ISM's Manufacturing Employment Index remained below 50 percent in January for the 28th consecutive month. The index registered 47.6 percent in January compared to 48.2 percent in December, a decrease of 0.6 percentage point. An Employment Index above 47.8 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment. The five industries reporting growth in employment during January are: Apparel; Furniture; Transportation & Equipment; Food; and Printing & Publishing.

Employment	%Higher	%Same	%Lower	Net	Index
January 2003	11	69	20	-9	47.6
December 2002	11	70	19	-8	48.2
November 2002	9	69	22	-13	45.1
October 2002	11	67	22	-11	45.6

Supplier Deliveries

ISM's Supplier Deliveries Index indicates delivery performance is slowing in January, but at the same rate of 52.6 percent when compared to December (a reading above 50 percent indicates slower deliveries). At 52.6 percent, the index is the same as reported in December. The seven industries reporting slower supplier deliveries in January are: Furniture; Primary Metals; Textiles; Electronic Components & Equipment; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Chemicals; and Printing & Publishing.

Supplier Deliveries	%Slower	%Same	%Faster	Net	Index
January 2003	9	85	6	+3	52.6
December 2002	8	87	5	+3	52.6
November 2002	11	80	9	+2	51.8
October 2002	12	83	5	+7	53.0

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

Inventories

The rate of liquidation of manufacturers' inventories accelerated in January as the Inventories Index registered 45.4 percent. This compares to 46.2 percent reported in December. The Inventories Index has been under 50 percent for 36 consecutive months. An Inventories Index greater than 42.1 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 five industries reporting higher inventories in January are: Apparel; Instruments & Photographic Equipment; Wood & Wood Products; Fabricated Metals; and Primary Metals.

Inventories	%Higher	%Same	%Lower	Net	Index
January 2003	18	53	29	-11	45.4
December 2002	16	56	28	-12	46.2
November 2002	13	55	32	-19	43.0
October 2002	12	58	30	-18	41.4

Customers' Inventories

The Customers' Inventories Index is at 42.5 percent, a decrease of 0.5 percentage point compared to the December reading of 43 percent. Respondents indicate that their customers do not have sufficient inventories on hand at this time. This is the 20th consecutive month that the index has registered below 50. Textiles; Instruments & Photographic Equipment; Glass, Stone & Aggregate; Chemicals; and Rubber & Plastic Products are the industries reporting excessive customer inventories during January.

Customers' Inventories	%Reporting	% Too High	% About Right	% Too Low	Net	Index
January 2003	79	10	65	25	-15	42.5
December 2002	82	10	66	24	-14	43.0
November 2002	80	12	69	19	-7	46.5
October 2002	83	9	67	24	-15	42.5

Prices

ISM's Prices Index (not seasonally adjusted, effective with January 2003 seasonal adjustments) indicates manufacturers continued to pay higher prices in January. This is the 11th consecutive month the index has registered higher prices. With the index at 57.5 percent, it is 0.6 percentage point higher than December's 56.9 percent. In January, 27 percent of supply executives reported paying higher prices and 12 percent reported paying lower prices, while 61 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. The industries reporting paying higher prices for January are: Chemicals; Primary Metals; Tobacco; Furniture; Rubber & Plastic Products; Instruments & Photographic Equipment; Textiles; Transportation & Equipment; Paper; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Food; Printing & Publishing; and Industrial & Commercial Equipment & Computers.

Prices	%Higher	%Same	%Lower	Net	Index
January 2003	27	61	12	+15	57.5
December 2002	22	66	12	+10	56.9
November 2002	18	70	12	+6	55.7
October 2002	27	65	8	+19	58.3

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 45 percent, indicating a faster rate of decline in manufacturers' backlogs as the index lost 1.5 percentage points from December's report of 46.5 percent. This is the seventh consecutive month that the Backlog of Orders Index has failed to grow. Of the 88 percent of respondents who report their backlog of orders, 19 percent reported greater backlogs, 29 percent reported smaller backlogs, and 52 percent reported no change from December. The industries reporting an increase in order backlogs during the month are: Apparel; Textiles; Fabricated Metals; Electronic Components & Equipment; Transportation & Equipment; and Instruments & Photographic Equipment.

Backlog of Orders	%Reporting	%Greater	%Same	%Less	Net	Index
January 2003	88	19	52	29	-10	45.0
December 2002	88	18	57	25	-7	46.5
November 2002	87	12	61	27	-15	42.5
October 2002	88	15	57	28	-13	43.5

New Export Orders

ISM's New Export Orders Index for January registered 55.6 percent, an increase of 3.1 percentage points when compared to December's index of 52.5 percent. This is the 13th consecutive month of growth in export orders. The industries reporting growth in new export orders in January are: Apparel; Rubber & Plastic Products; Industrial & Commercial Equipment & Computers; Instruments & Photographic Equipment; Electronic Components & Equipment; Chemicals; Transportation & Equipment; Food; and Fabricated Metals.

New Export Orders	%Reporting	%Better	%Same	%Worse	Net	Index
January 2003	74	13	82	5	+8	55.6
December 2002	76	13	75	12	+1	52.5
November 2002	76	12	76	12	0	50.6
October 2002	77	10	82	8	+2	53.1

Imports

Imports of materials by manufacturers grew during January as the Imports Index registered 59 percent. The index rose 4.2 percentage points when compared to December's index of 54.8 percent. The 12 industries reporting growth in import activity for January are: Apparel; Textiles; Furniture; Transportation & Equipment; Industrial & Commercial Equipment & Computers; Electronic Components & Equipment; Wood & Wood Products; Food; Printing & Publishing; Fabricated Metals; Chemicals; and Instruments & Photographic Equipment.

Imports	%Reporting	%Higher	%Same	%Lower	Net	Index
January 2003	77	19	76	5	+14	59.0
December 2002	76	18	73	9	+9	54.8
November 2002	75	14	75	11	+3	53.1
October 2002	79	12	75	13	-1	49.7

Buying Policy

Average commitment leadtime for Capital Expenditures declined 8 days to 102 days. Average leadtime for Production Materials declined 2 days to 48 days. Average leadtime for Maintenance, Repair, and Operating (MRO) supplies declined 1 day to 19 days.

Percent Reporting
	Hand to Mouth	30 Days	60 Days	90 Days	6 Mos.	1 Year+	Avg. Days
Capital Expenditures
January 2003	25	6	15	24	22	8	102
December 2002	23	8	11	21	29	8	110
November 2002	25	8	14	24	21	8	100
October 2002	23	8	16	22	27	4	96
Production Materials
January 2003	22	45	18	9	4	2	48
December 2002	19	44	21	10	4	2	50
November 2002	22	43	19	11	3	2	48
October 2002	23	45	16	12	2	2	46
MRO Supplies
January 2003	58	33	6	3	0	0	19
December 2002	57	32	9	2	0	0	20
November 2002	60	30	7	3	0	0	19
October 2002	60	33	6	1	0	0	17

In Short Supply

There are no commodities on the short supply list.

Up in Price

#2 Fuel Oil; Caustic Soda — 8th month; Chemicals; Chlorine; Energy; Gasoline; Hydrochloric Acid — 2nd month; Methanol; Natural Gas — 6th month; Nickel; Oil; Plastic; Resin; and Steel.

Down in Price

Corrugated; HDPE; and Hot-Rolled Steel Coil are the only commodities reported 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 42.9 percent, over a period of time, indicates that the overall economy, or Gross Domestic Product (GDP), is generally expanding; below 42.9 percent, it is generally declining. The distance from 50 percent or 42.9 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 February 2003 data will be released at 10:00 a.m. (ET) on March 3, 2003.

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