The ISM Reports On Business® Norbert J. Ore, C.P.M. Chair, Business Survey Committee Institute for Supply Management

Senior Loan Officers Source: Wachovia Commentary 2/13/08, John Silvia

51.4 Source:

By GREG IP January 15, 2008; Page A2 The U.S. is probably in or about to enter a recession, former Federal Reserve Chairman Alan Greenspan said. The odds are "not overwhelming but they are marginally in that direction" of recession, Mr. Greenspan said in an interview with The Wall Street Journal. "The symptoms are clearly there. Recessions don't happen smoothly. They are usually signaled by a discontinuity in the market place, and the data of recent weeks could very well be characterized in that manner," he said. Specifically, he cited a drop in the Institute for Supply Management's purchasing managers index to 47.7 in December after several months just above 50, the dividing line between expanding and contracting manufacturing activity. While "by no means conclusive,... [that] is the type of thing, if we were going into recession, we'd observe.“ Another sign, he said, was the jump in the unemployment rate to 5% in December from 4.7% in November. Mr. Greenspan first publicly raised the possibility of recession in February of last year, and put the odds at about 33%. He said in mid-December the odds had risen to about 50%. Yesterday, he said the odds were still close to 50% but "more likely higher than lower." Mr. Greenspan saw a glimmer of hope in the housing market, saying new-home sales may have bottomed because the number of purchases financed by subprime and Alt-A mortgages -- a category between subprime and prime -- has fallen to zero. But bloated inventories mean housing construction and prices are still bound to fall, he said. Source: WSJonline.com Greenspan Sees U.S. as Likely In Recession, or Soon to Be

Discontinuity 1: lack of continuity or cohesion 2: gap 3 a: the property of being not mathematically continuous b: an instance of being not mathematically continuous; especially : a value of an independent variable at which a function is not continuous Source:

53.3

Composition of GDP Government spending - 19% Capital Spending -16% Consumer Spending -70% Other - 5%

Composition of Consumer Spending (PCE*) * Personal Consumption Expenditures

2004 – AVG – AVG – AVG – AVG 51.1

Manufacturing OldIndexNew.30New Orders Production.20.20Employment.20.15Supplier.20 Deliveries.10Inventories.20 Non-Manufacturing Index Weight New Orders.25 Business Activity.25 Employment.25 Supplier Deliveries.25 ISM Composite Indexes

2.0

Manufacturing Growth Industries that should grow in 2008 Petroleum and Coal Products Electrical Equipment, Components Chemicals Primary Metals Machinery Paper Products Computer and Electronic Products Food, Beverage Industries in a recession currently, but will slowly recover in 2008 Nonmetallic Mineral Products Printing Textiles Wood Products Furniture Miscellaneous Mfg Apparel Industries on the margin in 2008 Transportation Equipment Plastics and Rubber Products Fabricated Metal Products

Buyer Be Aware 1.Slower growth – consumer continues to spend, business invests 2.Employment is stable?? Follow NMfg Survey 3.Strong areas geographically – Houston, Corn Belt, Las Vegas, NYC 4.Weak dollar continues to fuel export markets 5.Residential construction slow – commercial completing cycle 6.Shifting from a strong “seller’s” market to a selective “buyer’s” market 7.More emphasis on productivity in the Services sector 8.Spillover --- what is next?