HIGH LIGHTS. Non-Manufacturing Expanding at Faster Rate Than Manufacturing; New Orders Expanding in Both Sectors. Manufacturing.

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1 B U S I N E S S MARCH HIGH LIGHTS Expanding at Faster Rate Than Manufacturing; New Orders Expanding in Both Sectors Route to: Contents See the following pages for complete reports. Manufacturing report report Manufacturing charts charts Manufacturing 42.3% = B.E.A. Overall Mfg. Inventories Inventories Index The Inventories Index is an indication of manufacturers current inventory positions relative to the preceding month. Knowing if the change is voluntary or involuntary helps to understand the implications of an inventory build or decline. Voluntary changes are generally driven by demand, while involuntary changes are driven by economic factors beyond the control of the inventory manager. The Inventories Index once again reversed itself this month. In the past 12 months, we have seen a great deal of inventory build in response to higher sales levels. This month, new orders increased and it appears that inventories rose in response to the demand. Since recessions are generally caused by involuntary inventory build, this indicator is always worth watching. Norbert J. Ore, C.P.M., ISM Manufacturing Business Survey Committee, chair. Employment Index ISM s Employment Index indicates the month-to-month change in non-manufacturing organizations level of employment. When reporting this change, ISM s non-manufacturing members are requested to include temporary or contract employees as well as regular employees. The Employment Index has indicated increasing non-manufacturing employment for 18 consecutive months beginning in October. In February and March of this year, the ISM Employment Index has indicated the highest rates of employment growth in more than three years. Ralph G. Kauffman, Ph.D., C.P.M., ISM Business Survey Committee, chair. April Inside Supply Management 1

2 MARCH MANUFACTURING PMI at 55.2%; New Orders, Production Growing; Prices Up Economic activity in the manufacturing sector grew in March for the 22nd consecutive month, while the overall economy grew for the 41st consecutive month, say the nation s supply executives in the latest Manufacturing ISM Report On Business. The manufacturing sector maintained its strength in March, finishing the first quarter in a relatively strong position. Growth in new orders and inventories helped offset lower index readings in production, supplier deliveries and employment. Price inflation continues to present a problem for manufacturers as the Prices Index gained significant momentum. ISM s PMI registered 55.2 percent in March. ISM s New Orders Index increased to 57.1 percent in March. ISM s Production Index registered 56.5 percent. The ISM Employment Index is at 53.3 percent in March. ISM s Supplier Deliveries Index registered 52.5 percent. ISM s Inventories Index rose to 54.1 percent in March. ISM s Customers Inventories Index for March is at 46 percent. ISM s Prices Index in March is 73 percent. ISM s Backlog of Orders Index for March rose to 56 percent. ISM s New Export Orders Index registered 55.4 percent. ISM s Imports Index is at 58.9 percent in March. The 16 industries reporting growth in March listed in order are: Primary Metals; Textiles; Glass, Stone & Aggregate; Wood & Wood Products; Instruments & Photographic Equipment; Electronic AT A GLANCE MARCH ISM MANUFACTURING SURVEY Analysis 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. Data for this report was collected in March. Components & Equipment; Rubber & Plastic Products; Furniture; Miscellaneous*; Computers; Chemicals; Fabricated Metals; Transportation & Equipment; Printing & Publishing; Apparel; and Food. The industries reporting the same level of activity as last month are: Tobacco and Petroleum. Paper is the only industry reporting decreased activity during March. MARCH FEB. % POINT RATE OF TREND* INDEX INDEX INDEX CHANGE DIRECTION CHANGE (MONTHS) PMI Growing Slower 22 New Orders Growing Faster 23 Production Growing Slower 23 Employment Growing Slower 17 Supplier Deliveries Slowing Slower 21 Inventories Growing From Contracting 1 Customers Inventories Contracting Slower 46 Prices Increasing Faster 37 Backlog of Orders Growing Faster 4 New Export Orders Growing Slower 39 Imports Growing Slower THE ECONOMY Overall Economy Growing Slower 41 Manufacturing Growing Slower 22 *Number of months moving in current direction. UP IN PRICE ABS Plastic; Aluminum (17); Caustic Soda (11); Chemicals (14); Copper (6); Corrugated Containers (14); Diesel Fuel (7); Energy (2); Freight (13); Fuel (2); Fuel Oil; Gasoline (2); HDPE; Machined Components; MRO Items; Natural Gas (32); Oil (2); Oil-Based Products; Paper (13); Petroleum-Based Products; Plastic Products (various forms) (14); Plastic Resin (2); Plastics (8); Polyethylene; Polypropylene; Propylene; Resins (8); Solvents; Stainless Steel (7); Steel* (18); Titanium; and Wood. DOWN IN PRICE Steel*. IN SHORT SUPPLY Caustic Soda (2); Steel (15); and Steel Products (various forms). *Reported as both up and down in price. Note: The number of consecutive months the commodity is listed is indicated after each item. The PMI indicates that the manufacturing economy grew in March for the 22nd consecutive month. The PMI for March registered 55.2 percent, a decrease of 0.1 percentage point when compared to February s seasonally adjusted reading of 55.3 percent. A reading above percent indicates that the manufacturing economy is generally expanding; below PMI % = Manufacturing Economy 42.7% = Overall Economy 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 March 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 average PMI for January through March (55.6 percent) corresponds to a 4.7 percent increase in gross domestic product (GDP) on an annual basis. In addition, if the PMI for March (55.2 percent) is annualized, it corresponds to a 4.5 percent increase in GDP annually. 2 Inside Supply Management April

3 MARCH NON-MANUFACTURING Business Activity at 63.1%; Backlog of Orders Index Up; Exports Index at 51.5% Business activity in the non-manufacturing sector increased in March, say the nation s purchasing and supply executives in the latest ISM Report On Business. Non-manufacturing business activity increased for the 24th consecutive month in March. Business activity increased at a faster rate in March, as did new orders. Backlog of orders also increased at a substantially faster rate than in February, indicating the likelihood of continued strong business activity in the months ahead. Additional good news is that none of the 17 industries included in ISM s nonmanufacturing business survey reported a decrease in business activity compared to February. ISM s Business Activity Index registered 63.1 percent in March. The New Orders Index increased to 62.1 percent. ISM s Employment Index declined 2.5 percentage points to 57.1 percent. Supplier Deliveries registered 53 percent in March. ISM s Inventories Index grew slightly to 52.5 percent. The Prices Index is at 65.6 percent for March. The Backlog of Orders Index increased to 56.5 percent. The New Export Orders Index is at 51.5 percent, and Find it at To see the full text and all the charts in the report, visit the ISM Web site at and select the ISM Report On Business link from the menu at the left. Links to regional business survey reports can be found on ISM s Web site at the same location. Analysis by Ralph G. Kauffman, Ph.D., C.P.M., chair of the Institute for Supply Management Business Survey Committee; and coordinator of the Purchasing and Supply Management Program, University of Houston Downtown. Data for this report was collected in March. ISM s Imports Index increased to 59 percent in March. The Inventory Sentiment Index is at 64.5 percent, showing that respondents feel inventories are too high to the same levels as reported in both February and January. UP IN PRICE Air Conditioning; Aluminum (15); Asphalt/Asphalt Products; Bearings; Beef (4); Cable; Chemicals; Coffee; Coffee Products; Construction Services; Copper (19); Copper Cable and Wire; Corrugated Boxes/Packaging; Dairy Products (2); #1 Diesel Fuel; #2 Diesel Fuel (3); Fuel (16); Gasoline (16); Hotel Rates (4); Iron; Lumber and Lumber Products including Pine, Spruce and Treated (3); Metals/Metal-Related Products (2); Natural Gas (7); Office Supplies (2); Packaging; Paper/Paper Products (14); Petrochemical Products; Petroleum Based Products (2); Pipe; Plastic Items/Products (3); Plastics (15); Polyester Products; Polyethylene Products (2); Produce; PVC (3); Resin/Resin Based Products; Roofing Products/Shingles (5); Soy Oil; Stainless Steel (3); Steel (17); Steel Products (13); Transportation/ Freight Charges (11); Travel Costs; and Unleaded Gasoline (2). DOWN IN PRICE Computer Hardware (PCs and related products) (6). IN SHORT SUPPLY Bearings: Paper Roller, Radial, Spherical, Taper; Conveyor Belts; Roofing Insulation and Materials (2); and Steel (14). Note: The number of consecutive months the commodity is listed is indicated after each item. NON-MANUFACTURING VS. MANUFACTURING Manufacturing MAR. FEB. % POINT RATE OF TREND** MARCH FEB. % POINT SURVEY QUESTION INDEX INDEX CHANGE DIRECTION CHANGE (MONTHS) INDEX INDEX CHANGE Business Activity/ Production Increasing Faster New Orders Increasing Faster Employment Increasing Slower Supplier Deliveries Slowing Faster Inventories Increasing Faster Prices Increasing Slower Backlog of Orders Increasing Faster New Export Orders Increasing Slower Imports Increasing Faster Inventory Sentiment Too High No Change 94 N/A N/A Customers Inventories N/A N/A * ISM Report On Business data is seasonally adjusted for the Business Activity, New Orders, Prices and Employment indexes. Manufacturing ISM Report On Business data is seasonally adjusted except for Backlog of Orders, Prices and Customers Inventories. ** Number of months moving in same direction. April Inside Supply Management 3

4 MANUFACTURING MANUFACTURING MANUFACTURING MANUFACTURING MANUFACTURING NEW ORDERS 51.1% = Census Bureau Mfg. Index %Better %Same %Worse March February PRODUCTION % = Fed. Res. Brd. Ind. Prod. Index EMPLOYMENT 48.5% = B.L.S. Mfg. Employment March February SUPPLIER DELIVERIES Index %Better %Same %Worse March February Index %Slower %Same %Faster March February ISM s New Orders Index grew to 57.1 percent in March, indicating the 23rd consecutive month of growth. Fifteen industries reported increases for the month of March: Primary Metals; Textiles; Miscellaneous*; Electronic Components & Equipment; Glass, Stone & Aggregate; Instruments & Photographic Equipment; Industrial & Commercial Equipment & Computers; Rubber & Plastic Products; Wood & Wood Products; Chemicals; Transportation & Equipment; Furniture; Fabricated Metals; Food; and Printing & Publishing. ISM s Production Index is 56.5 percent in March, indicating the 23rd consecutive month of growth. Of the industries reporting in March, 14 registered growth: Glass, Stone & Aggregate; Textiles; Wood & Wood Products; Instruments & Photographic Equipment; Furniture; Electronic Components & Equipment; Chemicals; Miscellaneous*; Transportation & Equipment; Fabricated Metals; Rubber & Plastic Products; Primary Metals; Industrial & Commercial Equipment & Computers; and Printing & Publishing. ISM s Employment Index grew for the 17th consecutive month, registering 53.3 percent in March. The 12 industries reporting growth in employment during March are: Apparel; Wood & Wood Products; Paper; Electronic Components & Equipment; Printing & Publishing; Furniture; Transportation & Equipment; Rubber & Plastic Products; Primary Metals; Fabricated Metals; Industrial & Commercial Equipment & Computers; and Food. ISM s Supplier Deliveries Index for March registered 52.5 percent, a decrease of 1.4 percentage points compared to February s reading of 53.9 percent. A reading above percent indicates slower deliveries. The eight industries reporting slower supplier deliveries in March are: Instruments & Photographic Equipment; Rubber & Plastic Products; Miscellaneous*; Chemicals; Primary Metals; Industrial & Commercial Equipment & Computers; Paper; and Food. CUSTOMERS INVENTORIES PRICES BACKLOG OF ORDERS No (data was not collected prior to 1993) Index %Greater %Same %Less March February NEW EXPORT ORDERS 47.1% = B.L.S. Producer Prices Index for Intermediate Materials %Too %About %Too Index High Right Low March February March February March February The March Customers Inventories Index is at 46 percent. Respondents indicate that their customers do not have sufficient inventories on hand (inventories are too low) at this time. This is the 46th consecutive month that the index has registered below percent. Five industries reported higher customer inventories during March and they are: Paper; Furniture; Food; Electronic Components & Equipment; and Primary Metals. March s Prices Index is at 73 percent, 7.5 percentage points higher than February s reading of 65.5 percent. Eighteen industries reported paying higher prices: Petroleum; Rubber & Plastic Products; Instruments & Photographic Equipment; Paper; Chemicals; Miscellaneous*; Printing & Publishing; Food; Apparel; Furniture; Industrial & Commercial Equipment & Computers; Primary Metals; Electronic Components & Equipment; Transportation & Equipment; Glass, Stone & Aggregate; Textiles; Fabricated Metals; and Wood & Wood Products. ISM s Backlog of Orders Index registered 56 percent, indicating manufacturers backlogs in March are growing at a faster rate when compared to February. The 11 industries reporting an increase in order backlogs during the month are: Electronic Components & Equipment; Miscellaneous*; Apparel; Primary Metals; Wood & Wood Products; Industrial & Commercial Equipment & Computers; Rubber & Plastic Products; Instruments & Photographic Equipment; Chemicals; Transportation & Equipment; and Food. ISM s New Export Orders Index for March registered 55.4 percent, a decrease of 2 percentage points when compared to February s index of 57.4 percent. The nine industries reporting growth in new export orders in March are: Miscellaneous*; Textiles; Rubber & Plastic Products; Instruments & Photographic Equipment; Electronic Components & Equipment; Computers; Primary Metals; Food; and Fabricated Metals. INVENTORIES 42.3% = B.E.A. Overall Mfg. Inventories March February Manufacturers inventories rose in March following a one-month decline as ISM s Inventories Index registered 54.1 percent. The 11 industries reporting higher inventories in March are: Furniture; Fabricated Metals; Printing & Publishing; Primary Metals; Wood & Wood Products; Electronic Components & Equipment; Food; Rubber & Plastic Products; Chemicals; Paper; and Computers. *Miscellaneous a preponderance of jewelry, toys, sporting goods and musical instruments. IMPORTS March February The ISM Imports Index registered 58.9 percent. The 14 industries reporting growth in import activity for March are: Textiles; Apparel; Furniture; Miscellaneous*; Printing & Publishing; Fabricated Metals; Food; Computers; Wood & Wood Products; Electronic Components & Equipment; Transportation & Equipment; Rubber & Plastic Products; Chemicals; and Instruments & Photographic Equipment. 4 Inside Supply Management April

5 NON-MANUFACTURING NON-MANUFACTURING NON-MANUFACTURING NON-MANUFACTURING BUSINESS ACTIVITY March February ISM s Business Activity Index in March increased to 63.1 percent. This month, 15 sectors report increased business activity, none are reporting decreased activity, and two indicate unchanged activity compared to February. The industries reporting the highest rates of growth of business activity in March are: Entertainment; Mining; Communication; Finance & Banking; Retail Trade; and Other Services*. No industry is reporting contraction of business activity in March. PRICES March February ISM s Prices Index for March is 65.6 percent, down 0.8 percentage point from the seasonally adjusted 66.4 percent registered for February. The industries reporting the highest rates of increase in prices paid in March are: Agriculture; Transportation; Entertainment; Utilities; and Wholesale Trade. No industry is reporting price decreases in March. NEW ORDERS BACKLOG OF ORDERS March February ISM s New Orders Index increased to 62.1 percent in March. Comments from members include: More requests from customers ; New accounts ; Projects, projects and more projects ; and Increased lab support for ongoing research. Industries reporting the highest rates of growth of new orders in March are: Mining; Communication; Construction; Other Services*; Retail Trade; and Public Administration. No industry is reporting contraction of new orders in March. March February ISM s Backlog of Orders Index registered 56.5 percent in March. March s increase in order backlogs marks 22 out of the last 23 months that an increase has been reported in order backlogs. The industries reporting the highest rates of increase in order backlogs in March are: Transportation; Communication; Construction; Insurance; and Other Services*. The one industry reporting a decrease in backlog of orders in March is Wholesale Trade. EMPLOYMENT NEW EXPORT ORDERS March February ISM s Employment Index for March is 57.1 percent. Comments from respondents include: Increased workload projected for last half of year and New personnel hires due to upturn in business. The industries reporting the highest rates of growth in employment in March are: Construction; Mining; Utilities; Public Administration; and Wholesale Trade. The industries reporting reductions in employment in March are: Legal Services; Transportation; and Communication. March February The New Export Orders Index for March is 51.5 percent compared to February s 56 percent, indicating a slower rate of growth in March compared to February. The industries reporting increases in new export orders in March are: Mining; Retail Trade; and Other Services*. The industries reporting decreases in new export orders in March are: Public Administration and Wholesale Trade. SUPPLIER DELIVERIES Index %Slower %Same %Faster March February The Supplier Deliveries Index registered 53 percent, 0.5 percentage point higher than in February. A reading above percent indicates slower deliveries. The industries reporting the highest rates of slowing in supplier deliveries in March are: Transportation; Entertainment; Utilities; Mining; and Communication. Industries reporting faster supplier deliveries in March are: Finance & Banking and Wholesale Trade. IMPORTS March February The ISM Imports Index registered 59 percent, 1.5 percentage points higher than the 57.5 percent reported in February. The industries reporting increases in the use of imports in March are: Mining; Utilities; Retail Trade; Other Services*; Wholesale Trade; and Business Services. The one industry reporting a decrease in the use of imports in March is Entertainment. INVENTORIES INVENTORY SENTIMENT March February ISM s Inventories Index registered 52.5 percent in March. This is the second consecutive month of higher inventories after a dip in inventory size in January. The industries reporting the highest rates of inventory increases in March are: Transportation; Retail Trade; Utilities; Communication; Public Administration; and Business Services. The industries reporting inventory decreases in March are: Insurance; Health Services; Mining; and Agriculture. %Too %About %Too Index High Right Low March February The ISM Inventory Sentiment Index in March registered 64.5 percent, the same as reported in February and January. The industries reporting the highest rates of feeling that their inventories are too high in March are: Wholesale Trade; Construction; Agriculture; Communication; and Business Services. The one industry reporting that its inventories are too low in March is Mining. *Other Services Hotels, Rooming Houses, Camps and Other Lodging Places; Personal Services; Automotive Repair, Services and Parking; Miscellaneous Repair Services; Educational Services; Social Services; Museums, Art Galleries, and Botanical and Zoological Gardens; Membership Organizations; Engineering, Accounting, Research, Management and Related Services; and Miscellaneous Services. April Inside Supply Management 5