FOR RELEASE: March 1, 2002

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

PMI at 54.7%

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 February 2002.

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

(Tempe, Arizona) – Economic activity in the manufacturing sector indicated growth in February, ending 18 consecutive months of decline. The overall economy grew for the fourth 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. "February signals the turnaround for manufacturing based on a strong PMI reading and an accelerating trend in new orders and production. Most of the indexes are heading in the right direction at this point. Employment is still soft, but it is a lagging indicator and will need a number of months of growth before it recovers. Pricing power is still lagging, but should begin to develop if the trends in new orders and production continue."

ISM's Backlog of Orders Index indicates that order backlogs grew for the first time after 21 months of decline. ISM's Supplier Deliveries Index reflects slower deliveries for the second consecutive month. Manufacturing employment continued to decline in February as the index fell below the breakeven point (an index of 50 percent) for the 17th consecutive month. ISM's Prices Index remained below 50 percent as manufacturers experienced lower prices for the 12th consecutive month. New Export Orders grew in February for the second consecutive month. February's Imports Index decelerated slightly, but registered growth for the third consecutive month. Comments from supply executives fell into two groups this month. One group continued to express concerns with regard to business conditions, while the other indicated that things are starting to improve.

ISM's PMI is 54.7 percent in February, an increase of 4.8 percentage points from the 49.9 percent reported in January. ISM's New Orders Index rose from 55.3 percent in January to 62.8 percent in February. ISM's Production Index rose 9.2 percentage points from 52 percent in January to 61.2 percent in February. The ISM Employment Index is at 43.8 percent for February, an increase of 1.2 percentage points when compared to the 42.6 percent reported in January.

ISM's Supplier Deliveries Index rose to 52.3 percent from 51.7 percent in January. ISM's Inventories Index is 39.5 percent. ISM's Customer Inventories Index declined slightly to 41.5 percent from January's 43.5 percent indicating a faster rate of inventory liquidation when compared to January. ISM's Prices Index in February is 41.5 percent, a decrease of 2.4 percentage points from January's 43.9 percent. ISM's Backlog of Orders Index rose from 44.5 percent in January to 53 percent in February.

ISM's New Export Orders Index registered 51.1 percent, up 0.3 percentage point from January's 50.8 percent. Imports of materials by manufacturers grew, as ISM's Imports Index is 52 percent for the month, down from January's 52.1 percent.

"The overall picture shows growth in manufacturing activity during the month of February," added Ore. "The PMI hasn't been above the 50 mark since July 2000, so this is certainly welcome news. Manufacturing has struggled and hopefully this signals the beginning of a strong recovery. It is encouraging that 13 industries reported growth in new orders. It appears that the inventory liquidation is nearing completion as customers' inventories are quite low. Upward movement of prices for aluminum, copper, nickel, and steel give credibility to the development of pricing power in some industries as we head toward the second quarter."

Of the 20 industries in the manufacturing sector, 14 industries reported growth: Wood & Wood Products; Primary Metals; Fabricated Metals; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Rubber & Plastic Products; Tobacco; Leather; Chemicals; Transportation & Equipment; Glass, Stone & Aggregate; Food; Industrial & Commercial Equipment & Computers; Electronic Components & Equipment; and Printing & Publishing.

"There were no reports of commodities in short supply. Commodities reported up in price are: Aluminum, Copper, Nickel, and Steel. The commodities reported down in price are: Caustic Soda, Chemicals, Corrugated Containers, Natural Gas, High Density Polyethylene, Resins, and Steel," Ore stated.

FEBRUARY 2002 ISM BUSINESS SURVEY AT A GLANCE

	Series Index	Direction Feb vs Jan	Rate of Change Feb vs Jan
PMI	54.7	Growing	From Contracting
New Orders	62.8	Growing	Faster
Production	61.2	Growing	Faster
Employment	43.8	Contracting	Slower
Supplier Deliveries	52.3	Slower	Faster
Inventories	39.5	Contracting	Faster
Customer Inventories	41.5	Too Low	Lower
Prices	41.5	Decreasing	Faster
Backlog of Orders	53.0	Growing	From Contracting
New Export Orders	51.1	Growing	Faster
Imports	52.0	Growing	Slower

THE ECONOMY AT A GLANCE

Overall Economy	Growing	Faster
Manufacturing	Growing	From Contracting

PMI

The PMI indicates that the manufacturing economy grew during the month of February with an index of 54.7 percent. This is the first month of growth for the manufacturing sector following 18 consecutive months of decline and is significant when compared to January's 49.9 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 February 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 and February (52.3 percent) corresponds to 3.5 percent growth in real gross domestic product (GDP). However, if the PMI for February (54.7 percent) turned out to be the annual average for 2002, this would correspond to a 4.4 percent increase in GDP."

Month	Feb'02	Jan'02	Dec'01	Nov'01	Oct'01
PMI%	54.7	49.9	48.1	44.7	39.5
Month	Sep'01	Aug'01	Jul'01	Jun'01	May'01
PMI%	46.2	47.9	43.9	44.3	42.3
Month	Apr'01	Mar'01	Feb'01	Jan'01	Dec'00
PMI%	43.2	43.2	42.0	41.7	44.2

New Orders

ISM's New Orders Index indicated growth in February for the third consecutive month. The index is 62.8 percent, 7.5 percentage points greater than the 55.3 percent registered in January. 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 February are: Wood & Wood Products; Fabricated Metals; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Primary Metals; Electronic Components & Equipment; Rubber & Plastic Products; Chemicals; Food; Industrial & Commercial Equipment & Computers; Printing & Publishing; Furniture; Transportation & Equipment; and Instruments & Photographic Equipment.

New Orders	%Better	%Same	%Worse	Net	Index
February 2002	39	47	14	+25	62.8
January 2002	26	52	22	+4	55.3
December 2001	24	46	30	-6	55.5
November 2001	24	44	32	-8	48.4

Production

ISM's Production Index is 61.2 percent in February up from 52 percent in January, an increase of 9.2 percentage points. This is the third 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 20 industries reporting, those registering growth in February are: Wood & Wood Products; Tobacco; Primary Metals; Fabricated Metals; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Glass, Stone & Aggregate; Apparel; Rubber & Plastic Products; Transportation & Equipment; Chemicals; Industrial & Commercial Equipment & Computers; Food; and Printing & Publishing.

Production	%Better	%Same	%Worse	Net	Index
February 2002	33	54	13	+20	61.2
January 2002	22	54	24	-2	52.0
December 2001	21	52	27	-6	50.3
November 2001	20	52	28	-8	48.2

Employment

ISM's Manufacturing Employment Index remained below 50 percent in February for the 17th consecutive month. The Index registered 43.8 percent in February compared to 42.6 percent in January, an increase of 1.2 percentage points. 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. Wood & Wood Products is the only industry reporting growth in employment.

Employment	%Higher	%Same	%Lower	Net	Index
February 2002	9	68	23	-14	43.8
January 2002	7	65	28	-21	42.6
December 2001	3	70	27	-24	39.2
November 2001	5	61	34	-29	35.7

Supplier Deliveries

ISM's Supplier Deliveries Index indicates delivery performance is slower when compared to January (a reading above 50 percent indicates slower deliveries). At 52.3 percent, the index is 0.6 percentage point higher than January's 51.7 percent. The industries reporting slower supplier deliveries in February are: Primary Metals; Furniture; Instruments & Photographic Equipment; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Fabricated Metals; Electronic Components & Equipment; Printing & Publishing; and Transportation & Equipment.

Supplier Deliveries	%Slower	%Same	%Faster	Net	Index
February 2002	9	85	6	+3	52.3
January 2002	6	88	6	0	51.7
December 2001	5	86	9	-4	48.0
November 2001	4	88	8	-4	47.8

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 slightly in February as the Inventories Index registered 39.5 percent, down from the 40.5 percent reported in January. The Inventories Index has been under 50 percent for 25 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). Three industries reported higher inventories in February: Leather; Glass, Stone & Aggregate; and Rubber & Plastic Products.

Inventories	%Higher	%Same	%Lower	Net	Index
February 2002	10	64	26	-16	39.5
January 2002	10	58	32	-22	40.5
December 2001	9	55	36	-27	38.2
November 2001	9	55	36	-27	37.9

Customers' Inventories

Customers' inventories in February were perceived as lower when compared to January. The Customers' Inventories Index is at 41.5 percent, 2 percentage points lower than the 43.5 percent reported in January. The only industry reporting excessive customers' inventories in February is Primary Metals.

Customer Inventories	%Reporting	%Too High	%About Right	%Too Low	Net	Index
February 2002	88	8	67	25	-17	41.5
January 2002	88	11	67	23	-13	43.5
December 2001	91	11	66	23	-12	44.0
November 2001	89	12	65	23	-11	44.5

Prices

ISM's Prices Index indicates manufacturers continued to pay lower prices in February. With the index at 41.5 percent, this marks the 12th consecutive month the index has been below 50 percent. The index is 2.4 percentage points lower than January's 43.9 percent. In February, 9 percent of supply executives reported paying higher prices and 26 percent reported paying lower prices, while 65 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. Primary Metals; Fabricated Metals; Instruments & Photographic Equipment; Transportation & Equipment; and Electronic Components & Equipment are the industries reporting paying higher prices for the month.

Prices	%Higher	%Same	%Lower	Net	Index
February 2002	9	65	26	-17	41.5
January 2002	7	69	24	-17	43.9
December 2001	3	58	39	-36	33.2
November 2001	3	55	42	-39	32.0

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

Backlog of Orders

The Backlog of Orders Index grew in February after 21 consecutive months of contraction. ISM's Backlog of Orders Index (not seasonally adjusted) registered 53 percent, indicating growth in manufacturers' backlogs. Of the 88 percent of respondents who measure their backlog of orders, 23 percent reported greater backlogs, 17 percent reported smaller backlogs, and 60 percent reported no change from January. Fabricated Metals; Furniture; Rubber & Plastic Products; Wood & Wood Products; Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments); Primary Metals; Transportation & Equipment; and Industrial & Commercial Equipment & Computers are the industries reporting an increase in order backlog during the month.

Backlog of Orders	%Reporting	%Greater	%Same	%Less	Net	Index
February 2002	88	23	60	17	+6	53.0
January 2002	89	16	57	27	-11	44.5
December 2001	88	13	53	34	-21	39.5
November 2001	89	14	49	37	-23	38.5

New Export Orders

ISM's New Export Orders Index for February registered 51.1 percent, an increase of 0.3 percentage point when compared to January's index of 50.8 percent. The industries reporting growth in new export orders in February are: Instruments & Photographic Equipment; Electronic Components & Equipment; and Industrial & Commercial Equipment & Computers.

New Export Orders	%Exporting	%Better	%Same	%Worse	Net	Index
February 2002	74	11	78	11	0	51.1
January 2002	73	10	79	11	-1	50.8
December 2001	79	12	68	20	-8	47.6
November 2001	74	13	73	14	-1	48.6

Imports

Imports of materials by manufacturers grew in February as the Imports Index registered 52 percent, a 0.1 percentage point decrease when compared to January's report of 52.1 percent. The six industries reporting growth in import activity for February are: Tobacco; Fabricated Metals; Printing & Publishing; Electronic Components & Equipment; Transportation & Equipment; and Chemicals.

Imports	%Importing	%Higher	%Same	%Lower	Net	Index
February 2002	75	10	81	9	+1	52.0
January 2002	75	9	81	10	-1	52.1
December 2001	74	12	75	13	-1	50.3
November 2001	72	11	75	14	-3	49.9

Buying Policy

Average commitment leadtime for Capital Expenditures rose 6 days to 99 days. Average leadtime for Production Materials declined 2 days to 43 days. Average leadtime for Maintenance, Repair, and Operating (MRO) supplies rose 1 day to 21 days.

Percent Reporting
	Hand to Mouth	30 Days	60 Days	90 Days	6 Mos.	1 Year+	Avg. Days
Capital Expenditures
February 2002	25	8	16	21	23	7	99
January 2002	27	6	20	20	21	6	93
December 2001	28	8	18	21	21	4	86
November 2001	29	7	16	20	22	6	92
Production Materials
February 2002	25	47	17	7	2	2	43
January 2002	21	48	16	10	4	1	45
December 2001	23	45	18	9	3	2	46
November 2001	20	48	19	8	3	2	47
MRO Supplies
February 2002	53	35	10	2	0	0	21
January 2002	54	37	8	1	0	0	20
December 2001	57	32	9	2	0	0	20
November 2001	55	32	11	2	0	0	21

In Short Supply

No commodities reported in short supply.

Up in Price

Aluminum; Copper; Nickel; and Steel (also shown down in price).

Down in Price

Caustic Soda – 10th month; Chemicals; Corrugated Containers – 13th month; Natural Gas – 13th month; High Density Polyethylene; Resins; and Steel – 10th month (also shown up in price).

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.

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. In May 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 March 2002 data will be released at 10:00 a.m. (ET) on April 1, 2002.

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