September Manufacturing ISM Report On Business®;PMI at 52%;New Orders, Production and Employment Growing;Inventories Contracting;Supplier Deliveries Slowing

TEMPE, Ariz.--Economic activity in the manufacturing sector expanded in September for the eighth consecutive month, while the overall economy grew for the 71st 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. “Manufacturing growth continued in September while some sectors of the economy are apparently struggling. The trend is toward slower growth in manufacturing as the rate of growth in both the New Orders Index and Production Index slowed. The sector is apparently in excellent shape with regard to inventories as the Inventories Index fell to 41.6 percent, indicating significant inventory liquidation, and the rate of growth in the Employment Index increased slightly in September. Overall, September looks like a good month for manufacturing.”

TOP PERFORMING INDUSTRIES

The 11 industries reporting growth in September — listed in order — are: Petroleum & Coal Products; Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Paper Products; Nonmetallic Mineral Products; Chemical Products; Plastics & Rubber Products; Miscellaneous Manufacturing; Computer & Electronic Products; and Transportation Equipment.

WHAT RESPONDENTS ARE SAYING …

“Business continues strong across all market segments.” (Primary Metals)
“Outlook going forward is cloudy due to concerns from the mortgage market.” (Fabricated Metal Products)
“Economy appears to be in neutral. Waiting to see if the consumer confidence shows itself for the Christmas season as gasoline prices level off.” (Transportation Equipment)

“Signs of softening in pace of new orders.” (Miscellaneous Manufacturing)

MANUFACTURING AT A GLANCE SEPTEMBER 2007

Index	Series Index Sept.	Series Index Aug.	Percentage Point Change	Direction	Rate of Change	Trend(a) (Months)

PMI	52.0	52.9	-0.9	Growing	Slower	8
New Orders	53.4	55.3	-1.9	Growing	Slower	10
Production	54.6	56.1	-1.5	Growing	Slower	8
Employment	51.7	51.3	+0.4	Growing	Faster	6
Supplier Deliveries	51.9	50.0	+1.9	Slowing	From Unchanged	1
Inventories	41.6	45.4	-3.8	Contracting	Faster	14
Customers’ Inventories	50.0	49.0	+1.0	Unchanged	From Too Low	1
Prices	59.0	63.0	-4.0	Increasing	Slower	9
Backlog of Orders	51.0	50.5	+0.5	Growing	Faster	6
Exports	54.5	57.0	-2.5	Growing	Slower	58
Imports	53.0	52.5	+0.5	Growing	Faster	69
OVERALL ECONOMY Manufacturing Sector				Growing	Slower	71
OVERALL ECONOMY Manufacturing Sector				Growing	Slower	8

(a) Number of months moving in current direction

COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price

Chemicals; Corrugated Containers; Flour (2); Milk; Packaging Materials (2); Polypropylene (2); Soybean Products (4); Sulfuric Acid; and Wheat.

Commodities Down in Price

Aluminum Extrusions; Natural Gas (3); Nickel (3); and Stainless Steel.

Commodities in Short Supply

Sulfuric Acid (2) is the only commodity listed in short supply.

Note: The number of consecutive months the commodity is listed is indicated after each item.

SEPTEMBER 2007 MANUFACTURING INDEX SUMMARIES

PMI

Manufacturing grew at a slower rate in September as the PMI registered 52 percent, a decrease of 0.9 percentage point when compared to August’s reading of 52.9 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 41.9 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the 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 average for January through September (53 percent) corresponds to a 3.4 percent increase in real gross domestic product (GDP) annually. In addition, if the PMI for September (52 percent) is annualized, it corresponds to a 3.1 percent increase in real GDP annually.”

THE LAST 12 MONTHS

Month	PMI	Month	PMI

Sep 2007	52.0	Mar 2007	50.9
Aug 2007	52.9	Feb 2007	52.3
Jul 2007	53.8	Jan 2007	49.3
Jun 2007	56.0	Dec 2006	51.4
May 2007	55.0	Nov 2006	49.9
Apr 2007	54.7	Oct 2006	51.5
Average for 12 months – 52.5 High – 56.0 Low – 49.3

New Orders

ISM’s New Orders Index registered 53.4 percent in September. The index is 1.9 percentage points lower than the 55.3 percent reported in August. 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). Ten industries reported increases during September: Apparel, Leather & Allied Products; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Nonmetallic Mineral Products; Paper Products; Chemical Products; and Computer & Electronic Products.

New Orders	%Better	%Same	%Worse	Net	Index

Sep 2007	29	51	20	+9	53.4
Aug 2007	27	52	21	+6	55.3
Jul 2007	30	54	16	+14	57.5
Jun 2007	37	48	15	+22	60.3

Production

ISM’s Production Index registered 54.6 percent in September, which is 1.5 percentage points lower than the 56.1 percent reported in August. September is the eighth consecutive month of production growth for manufacturers. 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 September, 13 registered growth: Petroleum & Coal Products; Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Paper Products; Wood Products; Miscellaneous Manufacturing; Plastics & Rubber Products; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Chemical Products; Fabricated Metal Products; Computer & Electronic Products; and Transportation Equipment.

Production	%Better	%Same	%Worse	Net	Index

Sep 2007	31	53	16	+15	54.6
Aug 2007	26	56	18	+8	56.1
Jul 2007	26	56	18	+8	55.6
Jun 2007	35	55	10	+25	62.9

Employment

ISM’s Employment Index registered 51.7 percent in September, which is an increase of 0.4 percentage point when compared to August’s reading of 51.3 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 seven industries reporting growth in employment during September are: Petroleum & Coal Products; Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Transportation Equipment; Food, Beverage & Tobacco Products; Machinery; and Fabricated Metal Products.

Employment	%Higher	%Same	%Lower	Net	Index

Sep 2007	14	72	14	0	51.7
Aug 2007	10	79	11	-1	51.3
Jul 2007	15	70	15	0	50.2
Jun 2007	20	66	14	+6	51.1

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations increased 1.9 percentage points in September as the index rose to 51.9 percent, indicating slower deliveries when compared to August. A reading above 50 percent indicates slower deliveries. The seven industries reporting slower supplier deliveries in September are: Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Chemical Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Machinery; and Fabricated Metal Products.

Supplier Deliveries	%Slower	%Same	%Faster	Net	Index

Sep 2007	8	88	4	+4	51.9
Aug 2007	6	90	4	+2	50.0
Jul 2007	7	91	2	+5	52.0
Jun 2007	7	87	6	+1	49.7

Inventories

Manufacturers’ inventories registered 41.6 percent in September, which is 3.8 percentage points lower than August’s reading of 45.4 percent. This is the 14th consecutive month of inventory liquidation and the lowest reading since January 2007 when the index registered 39.9. 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 three industries reporting higher inventories in September are: Textile Mills; Printing & Related Support Activities; and Nonmetallic Mineral Products.

Inventories	%Higher	%Same	%Lower	Net	Index

Sep 2007	13	57	30	-17	41.6
Aug 2007	13	67	20	-7	45.4
Jul 2007	11	71	18	-7	48.5
Jun 2007	13	64	23	-10	45.3

Customers’ Inventories(b)

The ISM Customers’ Inventories Index registered 50 percent in September indicating no change from August. The index indicates that respondents believe their customers’ inventories are neither too high nor too low at this time. Six industries reported higher customers’ inventories during September: Furniture & Related Products; Fabricated Metal Products; Transportation Equipment; Food, Beverage & Tobacco Products; Chemical Products; and Computer & Electronic Products.

Customers’ Inventories	% Reporting	%Too High	%About Right	%Too Low	Net	Index

Sep 2007	76	16	68	16	0	50.0
Aug 2007	70	13	72	15	-2	49.0
Jul 2007	71	18	66	16	+2	51.0
Jun 2007	67	12	70	18	-6	47.0

Prices(b)

In September, the ISM Prices Index registered 59 percent, indicating manufacturers are paying higher prices on average when compared to August. While 30 percent of respondents reported paying higher prices and 12 percent reported paying lower prices, 58 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 September, eight industries reported paying higher prices: Food, Beverage & Tobacco Products; Plastics & Rubber Products; Textile Mills; Printing & Related Support Activities; Furniture & Related Products; Chemical Products; Paper Products; and Transportation Equipment.

Prices	%Higher	%Same	%Lower	Net	Index

Sep 2007	30	58	12	+18	59.0
Aug 2007	33	60	7	+26	63.0
Jul 2007	38	54	8	+30	65.0
Jun 2007	42	52	6	+36	68.0

Backlog of Orders(b)

ISM’s Backlog of Orders Index registered 51 percent in September, 0.5 percentage point higher than the 50.5 percent reported in August. Of the 84 percent of respondents who reported their backlog of orders, 24 percent reported greater backlogs, 22 percent reported smaller backlogs, and 54 percent reported no change from August. The eight industries reporting an increase in order backlogs in September are: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Paper Products; Furniture & Related Products; Plastics & Rubber Products; Chemical Products; Food, Beverage & Tobacco Products; and Machinery.

Backlog of Orders	% Reporting	%Greater	%Same	%Less	Net	Index

Sep 2007	84	24	54	22	+2	51.0
Aug 2007	84	19	63	18	+1	50.5
Jul 2007	86	23	58	19	+4	52.0
Jun 2007	86	23	61	16	+7	53.5

New Export Orders(b)

ISM’s New Export Orders Index registered 54.5 percent in September, a decrease of 2.5 percentage points when compared to August’s index of 57 percent. This is the 58th consecutive month of growth in export orders. The 10 industries reporting growth in new export orders in September are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Miscellaneous Manufacturing; Computer & Electronic Products; Chemical Products; Food, Beverage & Tobacco Products; and Machinery.

New Export Orders	% Reporting	%Higher	%Same	%Lower	Net	Index

Sep 2007	76	16	77	7	+9	54.5
Aug 2007	79	20	74	6	+14	57.0
Jul 2007	80	20	73	7	+13	56.5
Jun 2007	78	18	76	6	+12	56.0

Imports(b)

Imports of materials by manufacturers grew during September as the Imports Index registered 53 percent, 0.5 percentage point higher than the 52.5 percent reported in August. This is the 69th consecutive month of growth in import orders. The eight industries reporting growth in import activity for September are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Transportation Equipment; Plastics & Rubber Products; Furniture & Related Products; Miscellaneous Manufacturing; Chemical Products; and Computer & Electronic Products.

Imports	% Reporting	%Higher	%Same	%Lower	Net	Index

Sep 2007	82	16	74	10	+6	53.0
Aug 2007	82	16	73	11	+5	52.5
Jul 2007	82	20	69	11	+9	54.5
Jun 2007	85	17	75	8	+9	54.5

(b) 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 15 days to 125 days. Average leadtime for Production Materials decreased 1 day to 47 days. Average leadtime for Maintenance, Repair and Operating (MRO) Supplies increased 2 days to 26 days.

Percent Reporting

Capital Expenditures	Hand-to- Mouth	30 Days	60 Days	90 Days	6 Months	1 Year+	Average Days

Sep 2007	20	9	10	24	22	15	125
Aug 2007	19	10	16	23	22	10	110
Jul 2007	25	8	12	18	25	12	115
Jun 2007	26	8	12	18	23	13	115

Production Materials	Hand-to- Mouth	30 Days	60 Days	90 Days	6 Months	1 Year+	Average Days

Sep 2007	21	40	25	9	4	1	47
Aug 2007	20	38	29	8	4	1	48
Jul 2007	22	38	22	12	4	2	51
Jun 2007	19	43	26	7	5	0	45

MRO Supplies	Hand-to- Mouth	30 Days	60 Days	90 Days	6 Months	1 Year+	Average Days

Sep 2007	53	32	8	6	0	1	26
Aug 2007	45	41	11	3	0	0	24
Jul 2007	50	38	10	2	0	0	22
Jun 2007	50	36	9	5	0	0	23

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 October 2007 data will be released at 10:00 a.m. (ET) on Thursday, November 1, 2007.