The Semiannual Economic Forecasts May 10, 2005 ISM Business Survey Committees

Agenda The Manufacturing Sector The Non-Manufacturing Sector Thomas F. Siems, Ph.D. Robert Fry, Ph.D. Q & A

The Reports on Business® Surveying manufacturing since 1931 Over 350 respondents 20 SIC codes Weighted by contribution to GDP 70 percent response rate Non-manufacturing started in June 1997

Global Report – www.ism.ws/ISMReport

Manufacturing Semiannual Forecast Current Operating Rate Percent of Normal Capacity April 2005 86.8% Dec 2004 83% April 2004 85.6% Manufacturing What doe this indicator mean? What industries are affected? Is this a trend? Other implications based on monthly report?

Production Capacity Change Reported for 2004 Production Capacity Mfg December 2004 +4.0% Predicted for 2005 Production Capacity Mfg What doe this indicator mean? What industries are affected? Is this a trend? Other implications based on monthly report? April 2005 +6.0% December 2004 +5.6%

Capital Expenditures Predicted 2005 vs. 2004 Capital Expenditures Mfg April 2005 +9.8% December 2004 +1.6% What doe this indicator mean? What industries are affected? Is this a trend? Other implications based on monthly report?

Purchase Price Changes Reported End 2004 vs. April 2005 Price Changes Mfg April 2005 +4.3% Predicted End 2004 vs. End 2005 What doe this indicator mean? What industries are affected? Is this a trend? Other implications based on monthly report? Price Changes Mfg April 2005 +5.2%

Predicted Employment Change Balance of 2005 Overall Employment Mfg April 2005 +1.2% Dec 2004 +1.6% What doe this indicator mean? What industries are affected? Is this a trend? Other implications based on monthly report?

Business Revenues (nominal) Predicted 2005 vs. 2004 Business Revenues Mfg April 2005 +6.8% Dec 2004 +7.8% What doe this indicator mean? What industries are affected? Is this a trend? Other implications based on monthly report?

Predicted Change in Business Revenues by Industry 2005 vs. 2004 Manufacturing Primary Metals Wood & Wood Products Transportation & Equipment Electronic Components & Equipment Apparel What doe this indicator mean? What industries are affected? Is this a trend? Other implications based on monthly report?

PMI 1997-April 2005 What doe this indicator mean? What industries are affected? Is this a trend? Other implications based on monthly report?

PMI Annual Average Relative to Midpoint of 50

Manufacturing PMI April 2005 Index: 53.3%

Manufacturing New Orders April 2005 Index: 53.7%

Manufacturing Production April 2005 Index: 56.7%

Manufacturing Employment April 2005 Index: 52.3%

Manufacturing Supplier Deliveries April 2005 Index: 51.5%

Manufacturing Inventories April 2005 Index: 47.9%

Manufacturing New Orders - Inventories April 2005: +5.8%

Non-Manufacturing Semiannual Forecast Current Operating Rate Percent of Normal Capacity April 2005 86.9% Dec 2004 88.2% April 2004 85.4% Non-Manufacturing What doe this indicator mean? What industries are affected? Is this a trend? Other implications based on monthly report?

Production Capacity Change Reported for 2004 Production Capacity Non-Mfg December 2004 +3.1% Predicted for 2005 Production Capacity Non-Mfg What doe this indicator mean? What industries are affected? Is this a trend? Other implications based on monthly report? April 2005 +3.5% December 2004 +4.4%

Capital Expenditures Predicted 2005 vs. 2004 Capital Expenditures Non-Mfg April 2005 +1.4% December 2004 +1.8% What doe this indicator mean? What industries are affected? Is this a trend? Other implications based on monthly report?

Purchase Price Changes Reported End 2004 vs. April 2005 Price Changes Non-Mfg April 2005 +5.1% Predicted End 2004 vs. End 2005 What doe this indicator mean? What industries are affected? Is this a trend? Other implications based on monthly report? Price Changes Non-Mfg April 2005 +5.5%

Predicted Employment Change Balance of 2005 Overall Employment Non-Mfg April 2005 +1.3% Dec 2004 +3.1% What doe this indicator mean? What industries are affected? Is this a trend? Other implications based on monthly report?

Business Revenues (nominal) Predicted 2005 vs. 2004 Business Revenues Non-Mfg April 2005 +5.3% Dec 2004 +5.9% What doe this indicator mean? What industries are affected? Is this a trend? Other implications based on monthly report?

Predicted Change in Business Revenues by Industry 2005 vs. 2004 Non-Manufacturing Business Services Mining Wholesale Trade Construction Health Services What doe this indicator mean? What industries are affected? Is this a trend? Other implications based on monthly report?

Non-Manufacturing Business Activity 1997- April 2005 What doe this indicator mean? What industries are affected? Is this a trend? Other implications based on monthly report?

Comparison of PMI and Business Activity 1997- April 2005 What doe this indicator mean? What industries are affected? Is this a trend? Other implications based on monthly report?

Non-Manufacturing Business Activity Index Annual Average Relative to Midpoint of 50 1997 July – Dec.; 2005 Jan – Apr. 2004 Average: 62.4%

Non-Manufacturing Business Activity April 2005 Index: 61.7%

Non-Manufacturing New Orders April 2005 Index: 58.8%

Non-Manufacturing Inventories April 2005 Index: 54.5%

Non-Manufacturing Employment April 2005 Index: 53.3%

Non-Manufacturing Supplier Deliveries April 2005 Index: 53%

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