FOR RELEASE: February 2, 2004

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

PMI at 63.6%

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 2004. This report reflects the U.S. Department of Commerce's recently completed annual adjustment to the seasonal factors used to calculate the indexes.

Production, New Orders, Employment Grow
Inventories Decline
Supplier Deliveries Slower

(Tempe, Arizona) — Economic activity in the manufacturing sector grew in January for the eighth consecutive month, while the overall economy grew for the 27th 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 gained momentum in January as the PMI continued to accelerate. Both New Orders and Production remain quite strong, indicating that the manufacturing sector is experiencing a much-needed recovery. The Prices Index accelerated significantly as the metals and energy categories showed significant price volatility."

ISM's Backlog of Orders Index indicates that order backlogs increased in January, and the Employment Index grew for the third consecutive month. ISM's Prices Index indicates that manufacturers experienced significantly higher prices for their purchases. The New Export Orders and Import Indexes continue to grow, with imports growing at a slightly faster rate compared to last month.

Comments from purchasing and supply managers are generally encouraging with mentions of "record sales and orders on a per-day basis" and "Companies are beginning to refill their inventory pipelines." However, others are still reporting that they see no sign of the recovery, best exemplified by the comment "Recovery? What recovery?" It is obvious that certain sectors are lagging the rest of manufacturing as we start the new year.

ISM's PMI registered 63.6 percent in January, an increase of 0.2 percentage point when compared to the seasonally-adjusted 63.4 percent in December. ISM's New Orders Index declined 2 percentage points from 73.1 percent in December to 71.1 percent in January. ISM's Production Index rose 1.9 percentage points from 69.2 percent in December to 71.1 percent in January. The ISM Employment Index is at 52.9 percent for January, a decrease of 0.6 percentage point when compared to the 53.5 percent reported in December.

ISM's Supplier Deliveries Index registered 60.4 percent, 1.8 percentage points higher than December's 58.6 percent. ISM's Inventories Index registered 48.9 percent in January, up from the 46.3 percent reported in December. ISM's Customers' Inventories Index for January is at 40 percent, an increase of 1 percentage point compared to the December reading of 39 percent. ISM's Prices Index in January is 75.5 percent, 9.5 percentage points higher than the 66 percent reported in December.

ISM's Backlog of Orders Index decreased 0.5 percentage point, registering 60.5 percent in January compared to 61 percent in December. ISM's New Export Orders Index registered 57.5 percent, a decrease of 2.5 percentage points from December's 60 percent. ISM's Imports Index increased 1.4 percentage points to 59.5 percent in January, up from 58.1 percent in December.

"Both exports and imports remain strong based on this month's data. The weaker dollar is supportive of growth in exports, but it does not appear to be deterring imports into the U.S.," said Ore.

Of the 20 industries in the manufacturing sector, 17 industries reported growth: Apparel; Textiles; Miscellaneous*; Chemicals; Petroleum; Instruments & Photographic Equipment; Transportation & Equipment; Industrial & Commercial Equipment & Computers; Fabricated Metals; Primary Metals; Glass, Stone, & Aggregate; Electronic Components & Equipment; Paper; Furniture; Printing & Publishing; Food; and Rubber & Plastic Products.

"Electronic Components; Propylene; Steel; Steel Plate; and Steel Sheet are the commodities in short supply. Commodities reported up in price are: Aluminum; Aluminum Extrusions; Brass; Cobalt; Coke; Copper; Electronic Components; Energy; Ethylene; Freight; Fuel Oil; Gasoline; Natural Gas; Nickel; Polyethylene; Polyethylene, Film; Propylene; PVC; Resin; Scrap Iron; Soybean Oil; Stainless Steel; Steel; Steel, Bar; Steel, Galvanized; Steel, Hot Rolled; Steel — Sheet; and Sulfuric Acid. The commodities reported down in price are Caustic Soda; Corrugated Cartons; and Linerboard," Ore stated.

JANUARY 2004 ISM BUSINESS SURVEY AT A GLANCE

	Series Index	Direction Jan vs Dec	Rate of Change Jan vs Dec
PMI	63.6	Growing	Faster
New Orders	71.1	Growing	Slower
Production	71.1	Growing	Faster
Employment	52.9	Growing	Slower
Supplier Deliveries	60.4	Slowing	Faster
Inventories	48.9	Contracting	Slower
Customers' Inventories	40.0	Too Low	Slower
Prices	75.5	Increasing	Faster
Backlog of Orders	60.5	Growing	Slower
New Export Orders	57.5	Growing	Slower
Imports	59.5	Growing	Faster

THE ECONOMY AT A GLANCE

Overall Economy	Growing	Faster
Manufacturing	Growing	Faster

PMI

The PMI indicates that the manufacturing economy grew in January for the eighth consecutive month. The PMI for January registered 63.6 percent, an increase of 0.2 percentage point compared to the December reading of 63.4 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 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 (63.6 percent) corresponds to a 7.6 percent annualized increase in real gross domestic product (GDP).

Month	Jan'04	Dec'03	Nov'03	Oct'03	Sep'03
PMI%	63.6	63.4	61.3	57.1	54.7
Month	Aug'03	Jul'03	Jun'03	May'03	Apr'03
PMI%	55.0	52.6	50.4	50.0	46.2
Month	Mar'03	Feb'03	Jan'03	Dec'02	Nov'02
PMI%	46.6	49.4	53.0	53.3	49.6

New Orders

ISM's New Orders Index grew in January with a reading of 71.1 percent. The index is 2 percentage points lower than the 73.1 percent registered in December and is the ninth 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). Seventeen industries report increases for the month of January: Petroleum; Apparel; Chemicals; Furniture; Glass, Stone, & Aggregate; Primary Metals; Industrial & Commercial Equipment & Computers; Textiles; Miscellaneous*; Transportation & Equipment; Printing & Publishing; Instruments & Photographic Equipment; Paper; Fabricated Metals; Electronic Components & Equipment; Rubber & Plastic Products; and Food.

New Orders	%Better	%Same	%Worse	Net	Index
January 2004	48	40	12	+36	71.1
December 2003	45	42	13	+32	73.1
November 2003	45	43	12	+33	71.4
October 2003	37	48	15	+22	64.6

Production

ISM's Production Index is 71.1 percent in January, 1.9 percentage points higher than the 69.2 percent reported in December, reflecting the ninth consecutive month of growth. 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 surveyed in January, 17 registered growth: Chemicals; Textiles; Paper; Glass, Stone, & Aggregate; Miscellaneous*; Transportation & Equipment; Instruments & Photographic Equipment; Apparel; Fabricated Metals; Industrial & Commercial Equipment & Computers; Electronic Components & Equipment; Primary Metals; Food; Printing & Publishing; Furniture; Wood & Wood Products; and Rubber & Plastic Products.

Production	%Better	%Same	%Worse	Net	Index
January 2004	44	47	9	+35	71.1
December 2003	44	46	10	+34	69.2
November 2003	40	49	11	+29	65.6
October 2003	35	51	14	+21	62.3

Employment

ISM's Employment Index grew for the third consecutive month, following a 37-month trend of contraction. The index registered 52.9 percent in January compared to 53.5 percent in December, a decrease of 0.6 percentage point. 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 eight industries reporting growth in employment during January are: Apparel; Industrial & Commercial Equipment & Computers; Transportation & Equipment; Miscellaneous*; Instruments & Photographic Equipment; Fabricated Metals; Food; and Printing & Publishing.

Employment	%Higher	%Same	%Lower	Net	Index
January 2004	16	73	11	+5	52.9
December 2003	21	64	15	+6	53.5
November 2003	16	66	18	-2	50.8
October 2003	15	63	22	-7	48.0

Supplier Deliveries

ISM's Supplier Deliveries Index indicates delivery performance is slower when comparing January to December. January's reading of 60.4 percent is an increase of 1.8 percentage points over December's reading of 58.6 percent. A reading above 50 percent indicates slower deliveries. The 15 industries reporting slower supplier deliveries in January are: Furniture; Instruments & Photographic Equipment; Electronic Components & Equipment; Primary Metals; Fabricated Metals; Printing & Publishing; Miscellaneous*; Wood & Wood Products; Textiles; Transportation & Equipment; Food; Glass, Stone, & Aggregate; Industrial & Commercial Equipment & Computers; Paper; and Chemicals.

Supplier Deliveries	%Slower	%Same	%Faster	Net	Index
January 2004	24	72	4	+20	60.4
December 2003	17	81	2	+15	58.6
November 2003	14	82	4	+10	56.0
October 2003	11	87	2	+9	54.1

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

Inventories

Manufacturers' inventories declined in January as the index registered 48.9 percent, an increase of 2.6 percentage points when compared to December's 46.3 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 seven industries reporting higher inventories in January are: Apparel; Wood & Wood Products; Fabricated Metals; Textiles; Primary Metals; Electronic Components & Equipment; and Food.

Inventories	%Higher	%Same	%Lower	Net	Index
January 2004	21	55	24	-3	48.9
December 2003	13	64	23	-10	46.3
November 2003	16	62	22	-6	49.6
October 2003	14	60	26	-12	44.4

Customers' Inventories**

The Customers' Inventories Index is at 40 percent, an increase of 1.0 percentage point compared to the December reading of 39 percent. Respondents indicate that their customers do not have sufficient inventories on hand at this time. This is the 32nd consecutive month that the index has registered below 50 percent. Paper and Furniture are the only industries reporting excessive customers' inventories during January.

Customers' Inventories	%Reporting	% Too High	% About Right	% Too Low	Net	Index
January 2004	72	7	66	27	-20	40.0
December 2003	74	5	68	27	-22	39.0
November 2003	77	8	63	29	-21	39.5
October 2003	73	5	68	27	-22	39.0

Prices**

ISM's Prices Index indicates manufacturers continued to pay higher prices in January. This is the 23rd consecutive month the index has registered higher prices. January's index is at 75.5 percent, 9.5 percentage points higher than December's reading of 66 percent. The last time the Prices Index registered higher was in March 2000, when it registered 78.7 percent. In January, 54 percent of supply executives reported paying higher prices and 3 percent reported paying lower prices, while 43 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 17 industries reporting paying higher prices in January are: Tobacco; Primary Metals; Fabricated Metals; Industrial & Commercial Equipment & Computers; Paper; Rubber & Plastic Products; Miscellaneous*; Food; Chemicals; Textiles; Furniture; Glass, Stone, & Aggregate; Electronic Components & Equipment; Transportation & Equipment; Wood & Wood Products; Instruments & Photographic Equipment; and Printing & Publishing.

Prices	%Higher	%Same	%Lower	Net	Index
January 2004	54	43	3	+51	75.5
December 2003	37	58	5	+32	66.0
November 2003	33	62	5	+28	64.0
October 2003	26	65	9	+17	58.5

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 registered 60.5 percent, indicating manufacturers' backlogs in January were higher when compared to December. Of the 90 percent of respondents who report their backlog of orders, 34 percent reported greater backlogs, 13 percent reported smaller backlogs, and 53 percent reported no change from December. The 15 industries reporting an increase in order backlogs during the month are: Glass, Stone, & Aggregate; Industrial & Commercial Equipment & Computers; Miscellaneous*; Apparel; Furniture; Transportation & Equipment; Fabricated Metals; Paper; Electronic Components & Equipment; Textiles; Primary Metals; Chemicals; Printing & Publishing; Instruments & Photographic Equipment; and Rubber & Plastic Products.

Backlog of Orders	%Reporting	%Greater	%Same	%Less	Net	Index
January 2004	90	34	53	13	+21	60.5
December 2003	88	34	54	12	+22	61.0
November 2003	86	33	52	15	+18	59.0
October 2003	87	27	53	20	+7	53.5

New Export Orders

ISM's New Export Orders Index for January registered 57.5 percent, a decrease of 2.5 percentage points when compared to December's index of 60 percent. This is the 14th consecutive month of growth in export orders. The 13 industries reporting growth in new export orders in January are: Apparel; Glass, Stone, & Aggregate; Textiles; Printing & Publishing; Miscellaneous*; Paper; Industrial & Commercial Equipment & Computers; Transportation & Equipment; Chemicals; Primary Metals; Rubber & Plastic Products; Fabricated Metals; and Electronic Components & Equipment.

New Export Orders	%Reporting	%Better	%Same	%Worse	Net	Index
January 2004	75	21	72	7	+14	57.5
December 2003	77	22	72	6	+16	60.0
November 2003	77	20	74	6	+14	57.1
October 2003	77	20	75	5	+15	59.3

Imports

Imports of materials by manufacturers grew during January as the Imports Index registered 59.5 percent. The index increased 1.4 percentage points when compared to December's index of 58.1 percent. The 14 industries reporting growth in import activity for January are: Apparel; Industrial & Commercial Equipment & Computers; Miscellaneous*; Electronic Components & Equipment; Printing & Publishing; Transportation & Equipment; Instruments & Photographic Equipment; Wood & Wood Products; Food; Rubber & Plastic Products; Fabricated Metals; Chemicals; Furniture; and Primary Metals.

Imports	%Reporting	%Higher	%Same	%Lower	Net	Index
January 2004	77	21	74	5	+16	59.5
December 2003	78	23	69	8	+15	58.1
November 2003	78	26	69	5	+21	61.0
October 2003	78	19	76	5	+14	58.4

*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 increased 8 days to 108 days. Average leadtime for Production Materials increased 1 day to 50 days. Average leadtime for Maintenance, Repair, and Operating (MRO) supplies increased 1 day to 22 days.

	Percent Reporting
	Hand to Mouth	30 Days	60 Days	90 Days	6 Mos.	1 Year+	Avg. Days
Capital Expenditures
January 2004	21	10	12	23	26	8	108
December 2003	27	11	12	20	21	9	100
November 2003	25	7	17	21	21	9	103
October 2003	24	10	15	20	22	9	103
Production Materials
January 2004	20	42	21	12	3	2	50
December 2003	23	41	19	11	4	2	49
November 2003	25	44	19	7	4	1	43
October 2003	25	39	21	9	5	1	46
MRO Supplies
January 2004	53	35	9	2	1	0	22
December 2003	54	36	7	2	1	0	21
November 2003	57	34	5	3	1	0	21
October 2003	54	35	7	3	1	0	22

In Short Supply

Electronic Components; Propylene; Steel; Steel, Plate; and Steel, Sheet are the commodities reported in short supply.

Up in Price

Aluminum — 3rd month; Aluminum Extrusions — 2nd month; Brass — 3rd month; Cobalt; Coke; Copper; Electronic Components; Energy; Ethylene — 2nd month; Freight — 2nd month; Fuel Oil; Gasoline; Natural Gas — 18th month; Nickel — 6th month; Polyethylene; Polyethylene, Film; Propylene; PVC; Resin — 2nd month; Scrap Iron; Soybean Oil; Stainless Steel — 4th month; Steel — 4th month; Steel, Bar; Steel, Galvanized; Steel, Hot Rolled; Steel, Sheet; and Sulfuric Acid.

Down in Price

Caustic Soda; Corrugated Cartons — 11th month; and Linerboard.

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

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