FOR RELEASE: January 2, 2008

Contact:

Andrea Waas, APR ISM, Vice President Business & Public Relations Tempe, Arizona 800/888-6276, Ext. 3009 E-mail: awaas@ism.ws

PMI at 47.7%

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 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 2007.

New Orders, Production, Employment and Inventories Contracting
Supplier Deliveries Slowing

(Tempe, Arizona) — Economic activity in the manufacturing sector failed to grow in December following 10 consecutive months of expansion, while the overall economy grew for the 74th 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. "The manufacturing sector failed to grow in December ending 10 consecutive months of growth. The recent trend has been toward slower growth. However, December was apparently a very tough month as New Orders, Production and Employment were all below the break-even mark of 50 percent. Industries close to the housing market appear to be struggling more than others, and those involved in exports seem to be doing better. Slower demand appears to be more of a problem than excessive inventories based on the respondents' comments."

TOP PERFORMING INDUSTRIES

The seven industries reporting growth in December — listed in order — are: Apparel, Leather & Allied Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Machinery; Primary Metals; and Miscellaneous Manufacturing.

WHAT RESPONDENTS ARE SAYING ...

• "Have received a large volume of price increase notices in the last month with increases between 3 percent to as much as 15 percent." (Chemical Products)
• "Business is good, but higher raw material prices are squeezing margins." (Primary Metals)
• "The heavy truck industry is not recovering as expected. The latest forecast does not show an increase in orders until Q3 2008." (Fabricated Metal Products)
• "General business conditions are slow." (Paper Products)
• "Upward price of raw materials, plus low inventories, is pushing price of resins skyward." (Plastics & Rubber Products)

MANUFACTURING AT A GLANCE DECEMBER 2007
Index	Series Index December	Series Index November	Percentage Point Change	Direction	Rate of Change	Trend* (Months)
PMI	47.7	50.8	-3.1	Contracting	From Growing	1
New Orders	45.7	52.6	-6.9	Contracting	From Growing	1
Production	47.3	51.9	-4.6	Contracting	From Growing	1
Employment	48.0	47.8	+0.2	Contracting	Slower	2
Supplier Deliveries	53.3	51.7	+1.6	Slowing	Faster	4
Inventories	45.5	46.9	-1.4	Contracting	Faster	17
Customers' Inventories	51.5	49.0	+2.5	Too High	From Too Low	1
Prices	68.0	67.5	+0.5	Increasing	Faster	12
Backlog of Orders	43.0	41.5	+1.5	Contracting	Slower	3
Exports	52.5	58.5	-6.0	Growing	Slower	61
Imports	48.0	47.5	+0.5	Contracting	Slower	3
OVERALL ECONOMY				Growing	Slower	74
Manufacturing Sector				Contracting	From Growing	1

*Number of months moving in current direction

COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price

Caustic Soda (3); Corn-based Products; Corrugated Containers (4); Diesel Fuel; Fuel Surcharges; Gasoline (2); Methanol (3); Natural Gas (2); Oil (2); Packaging (2); Plastic Products (2); Polypropylene Resin (2); Stainless Steel; Steel; and Sulfuric Acid (2).

Commodities Down in Price

No commodities are 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 2007 MANUFACTURING INDEX SUMMARIES

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PMI

Manufacturing failed to grow in December as the PMI registered 47.7 percent, a decrease of 3.1 percentage points when compared to November's reading of 50.8 percent. This is the first month that the manufacturing sector has failed to grow since January 2007. 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 41.9 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates that the overall economy is growing while the manufacturing sector is contracting. "The past relationship between the PMI and the overall economy indicates that the PMI average for January through December (52.2 percent) corresponds to a 3.2 percent increase in real gross domestic product (GDP) annually. In addition, if the PMI for December (47.7 percent) is annualized, it corresponds to a 1.8 percent increase in real GDP annually."

THE LAST 12 MONTHS

Month	PMI		Month	PMI
Dec 2007	47.7		Jun 2007	56.0
Nov 2007	50.8		May 2007	55.0
Oct 2007	50.9		Apr 2007	54.7
Sep 2007	52.0		Mar 2007	50.9
Aug 2007	52.9		Feb 2007	52.3
Jul 2007	53.8		Jan 2007	49.3
Average for 12 months – 52.2 High – 56.0 Low – 47.7

New Orders

ISM's New Orders Index registered 45.7 percent in December. The index is 6.9 percentage points lower than the 52.6 percent reported in November. A New Orders Index above 49.1 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars).

Five industries reported increases during December: Apparel, Leather & Allied Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Primary Metals.

New Orders	% Better	% Same	% Worse	Net	Index
Dec 2007	15	55	30	-15	45.7
Nov 2007	27	46	27	0	52.6
Oct 2007	18	64	18	0	52.5
Sep 2007	29	51	20	+9	53.4

Production

ISM's Production Index fell to 47.3 percent in December, a decrease of 4.6 percentage points when compared to November's reading of 51.9 percent. An index above 49.8 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures.

Of the industries reporting in December, eight registered growth: Apparel, Leather & Allied Products; Petroleum & Coal Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Paper Products; Machinery; Miscellaneous Manufacturing; and Primary Metals.

Production	% Better	% Same	% Worse	Net	Index
Dec 2007	16	58	26	-10	47.3
Nov 2007	23	55	22	+1	51.9
Oct 2007	18	60	22	-4	49.6
Sep 2007	31	53	16	+15	54.6

Employment

ISM's Employment Index registered 48 percent in December, which is an increase of 0.2 percentage point when compared to November's reading of 47.8 percent. An Employment Index above 49.2 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 December are: Apparel, Leather & Allied Products; Petroleum & Coal Products; Machinery; Food, Beverage & Tobacco Products; and Chemical Products.

Employment	% Higher	% Same	% Lower	Net	Index
Dec 2007	11	71	18	-7	48.0
Nov 2007	14	67	19	-5	47.8
Oct 2007	17	66	17	0	52.0
Sep 2007	14	72	14	0	51.7

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations continued to slow in December as the Supplier Deliveries Index increased 1.6 percentage points to 53.3 percent. A reading above 50 percent indicates slower deliveries.

The five industries reporting slower supplier deliveries in December are: Printing & Related Support Activities; Chemical Products; Computer & Electronic Products; Fabricated Metal Products; and Primary Metals.

Supplier Deliveries	% Slower	% Same	% Faster	Net	Index
Dec 2007	8	88	4	+4	53.3
Nov 2007	5	92	3	+2	51.7
Oct 2007	7	87	6	+1	50.6
Sep 2007	8	88	4	+4	51.9

Inventories

Manufacturers' inventories contracted again in December as the Inventories Index registered 45.5 percent, which is 1.4 percentage points lower than November's reading of 46.9 percent. This is the 17th consecutive month of inventory liquidation. An Inventories Index greater than 42.4 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 four industries reporting higher inventories in December are: Wood Products; Primary Metals; Transportation Equipment; and Computer & Electronic Products.

Inventories	% Higher	% Same	% Lower	Net	Index
Dec 2007	16	57	27	-11	45.5
Nov 2007	18	55	27	-9	46.9
Oct 2007	17	57	26	-9	47.2
Sep 2007	13	57	30	-17	41.6

Customers' Inventories*

The ISM Customers' Inventories Index registered 51.5 percent in December, an increase of 2.5 percentage points when compared to November. The index indicates that respondents believe their customers' inventories are too high at this time.

Eight industries reported higher customers' inventories during December: Plastics & Rubber Products; Textile Mills; Paper Products; Electrical Equipment, Appliances & Components; Furniture & Related Products; Nonmetallic Mineral Products; Fabricated Metal Products; and Chemical Products.

Customers' Inventories	% Reporting	%Too High	%About Right	%Too Low	Net	Index
Dec 2007	75	20	63	17	+3	51.5
Nov 2007	79	13	72	15	-2	49.0
Oct 2007	73	20	68	12	+8	54.0
Sep 2007	76	16	68	16	0	50.0

Prices*

In December, the ISM Prices Index registered 68 percent, indicating manufacturers are paying higher prices on average when compared to November. While 43 percent of respondents reported paying higher prices and 7 percent reported paying lower prices, 50 percent of supply executives reported paying the same prices as the preceding month. A Prices Index above 47.2 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices.

In December, 14 industries reported paying higher prices: Plastics & Rubber Products; Food, Beverage & Tobacco Products; Textile Mills; Chemical Products; Primary Metals; Apparel, Leather & Allied Products; Paper Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Wood Products; Fabricated Metal Products; Machinery; Computer & Electronic Products; and Transportation Equipment.

Prices	% Higher	% Same	% Lower	Net	Index
Dec 2007	43	50	7	+36	68.0
Nov 2007	42	51	7	+35	67.5
Oct 2007	33	60	7	+26	63.0
Sep 2007	30	58	12	+18	59.0

Backlog of Orders*

ISM's Backlog of Orders Index registered 43 percent in December, 1.5 percentage points higher than the 41.5 percent reported in November. This is the third consecutive month of contraction in the Backlog of Orders Index. Of the 85 percent of respondents who reported their backlog of orders, 14 percent reported greater backlogs, 28 percent reported smaller backlogs, and 58 percent reported no change from November.

The four industries reporting an increase in order backlogs in December are: Plastics & Rubber Products; Machinery; Food, Beverage & Tobacco Products; and Miscellaneous Manufacturing.

Backlog of Orders	% Reporting	% Greater	% Same	% Less	Net	Index
Dec 2007	85	14	58	28	-14	43.0
Nov 2007	88	13	57	30	-17	41.5
Oct 2007	83	16	60	24	-8	46.0
Sep 2007	84	24	54	22	+2	51.0

New Export Orders*

ISM's New Export Orders Index registered 52.5 percent in December, a decrease of 6 percentage points when compared to November's index of 58.5 percent. This is the 61st consecutive month of growth in export orders.

The seven industries reporting growth in new export orders in December are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Primary Metals; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Transportation Equipment; and Computer & Electronic Products.

New Export Orders	% Reporting	% Higher	% Same	% Lower	Net	Index
Dec 2007	75	17	71	12	+5	52.5
Nov 2007	77	19	79	2	+17	58.5
Oct 2007	77	19	76	5	+14	57.0
Sep 2007	76	16	77	7	+9	54.5

Imports*

Imports of materials by manufacturers failed to grow during December as the Imports Index registered 48 percent, 0.5 percentage point higher than the 47.5 percent reported in November. This is the third month of contraction in the index following 69 consecutive months of growth.

The three industries reporting growth in import activity for December are: Apparel, Leather & Allied Products; Transportation Equipment; and Machinery.

Imports	% Reporting	% Higher	% Same	% Lower	Net	Index
Dec 2007	80	13	70	17	-4	48.0
Nov 2007	83	10	75	15	-5	47.5
Oct 2007	77	8	79	13	-5	47.5
Sep 2007	82	16	74	10	+6	53.0

* 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 leadtime for Capital Expenditures increased 3 days to 123 days. Average leadtime for Production Materials increased 2 days to 50 days. Average leadtime for Maintenance, Repair and Operating (MRO) Supplies is unchanged at 21 days.

Percent Reporting
Capital Expenditures	Hand- to- Mouth	30 Days	60 Days	90 Days	6 Months	1 Year+	Average Days
Dec 2007	22	9	12	18	25	14	123
Nov 2007	21	9	13	19	25	13	120
Oct 2007	21	8	12	23	21	15	123
Sep 2007	20	9	10	24	22	15	125
Production Materials	Hand- to- Mouth	30 Days	60 Days	90 Days	6 Months	1 Year+	Average Days
Dec 2007	19	37	28	10	5	1	50
Nov 2007	20	39	28	8	4	1	48
Oct 2007	21	38	26	10	4	1	48
Sep 2007	21	40	25	9	4	1	47
MRO Supplies	Hand- to- Mouth	30 Days	60 Days	90 Days	6 Months	1 Year+	Average Days
Dec 2007	53	35	9	3	0	0	21
Nov 2007	56	31	10	3	0	0	21
Oct 2007	54	33	9	4	0	0	22
Sep 2007	53	32	8	6	0	1	26

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 varying weights: New Orders — 30%; Production — 25%; Employment — 20%; Supplier Deliveries — 15%; and Inventories — 10%.

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 41.9 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 41.9 percent, it is generally declining. The distance from 50 percent or 41.9 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 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 2008 data will be released at 10:00 a.m. (ET) on Friday, February 1, 2008.

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