The Semiannual Economic Forecast April 30, 2013 ISM Business Survey Committees

2 Agenda n Bradley J. Holcomb, CPSM, CPSD Manufacturing Semiannual Forecast n Anthony S. Nieves, C.P.M., CFPM Non-Manufacturing Semiannual Forecast n Bernard Baumohl, The Economic Outlook Group n Q & A

3 Dr. John H. Hoagland (December 22, 1919 – March 6, 2013) n BA from Oberlin College, MBA from Harvard University, PhD from the Ohio State University n Purchasing Professor at Michigan State University’s Broad College of Business from 1952 through his retirement in 1990 n Co-founder of the Purchasing and Supply Management Executive Seminar at MSU n Awarded an NAPM Professorship n ISM J. Shipman Gold Medal Award recipient

4 Dr. John H. Hoagland (December 22, 1919 – March 6, 2013) n Paul Harris Fellow from Rotary International n Robert Angell Award honoree from NAPM of Central Michigan n Honorary Alumni Award winner from MSU Alumni Association n Hoagland-Metzler Endowed Chair in Purchasing and Supply Management at MSU n ISM John H. Hoagland Award for Distinguished Service by Academics & Practitioners created to honor Dr. Hoagland

5 Dr. John H. Hoagland (December 22, 1919 – March 6, 2013) n Passionately championed the advancement and recognition of the ISM Report On Business ® and the PMI

6 The Report On Business ® n Surveying manufacturing since 1931 – Approximately 350 respondents – 18 NAICS categories – Weighted by contribution to GDP n Non-manufacturing started in June 1998 – Approximately 350 respondents – 18 NAICS categories – Weighted by contribution to GDP

7 Manufacturing Semiannual Forecast Current Operating Rate Percent of Normal Capacity April % December % April % Manufacturing

8 Reported for 2012 Production Capacity Change April % December % Predicted for 2013 December % Production Capacity Mfg

9 Predicted 2013 vs Capital Expenditures Capital ExpendituresMfg April % December %

10 Price ChangesMfg April % Purchase Price Changes Reported April 2013 vs. End 2012 Predicted End 2013 vs. End 2012 Price Changes Mfg April %

11 Predicted Employment Change Employment ChangesMfg April % Predicted End 2013 vs. April 2013 Predicted End 2013 vs. End 2012 Employment ChangesMfg December %

12 Business Revenues (nominal) Business RevenuesMfg April % December % Predicted 2013 vs. 2012

13 Manufacturing 1.Wood Products 2.Furniture & Related Products 3.Nonmetallic Mineral Products 4.Petroleum & Coal Products 5.Electrical Equipment, Appliances & Components Predicted Increase in Business Revenues by Industry 2013 vs. 2012

14 PMI 2005 – March 2013

15 PMI Annual Average Relative to Midpoint of Average: 51.7% 2013 Average (through March): 52.9%

16 Percent of Normal Capacity April % December % April % Non-Manufacturing Non-Manufacturing Semiannual Forecast Current Operating Rate

17 Reported for 2012 Production Capacity Change April % December % Predicted for 2013 December % Production Capacity Non-Mfg

18 Predicted 2013 vs Capital Expenditures Capital ExpendituresNon-Mfg April % December %

19 Price ChangesNon-Mfg April % Purchase Price Changes Reported April 2013 vs. End 2012 Predicted End 2013 vs. End 2012 Price ChangesNon-Mfg April %

20 Predicted Employment Change Employment Changes Non-Mfg April % Predicted End 2013 vs. April 2013 Predicted End 2013 vs. End 2012 Employment ChangesNon-Mfg December %

21 Business Revenues (nominal) Business RevenuesNon-Mfg April % December % Predicted 2013 vs. 2012

22 Non-Manufacturing 1.Construction 2.Transportation & Warehousing 3.Retail Trade 4.Professional, Scientific & Technical Services 5.Other Services Predicted Increase in Business Revenues by Industry 2013 vs. 2012

23 NMI January 2008 – March 2013

24 Comparison of PMI and NMI January 2008 – March 2013

25 NMI Annual Average Annual Average Relative to Midpoint of Average: 54.6% 2013 Average (through March): 55.2%

26 Non-Manufacturing Business Activity Index Annual Average Relative to Midpoint of Average: 57.7% 2013 Average (through March): 56.6%

27 n Operating rate is currently 80.2% of normal capacity. n Production capacity is expected to increase 6.7% in n Capital expenditures are expected to increase 9.1% in n Prices paid increased 1.4% through the end of April n Prices are expected to increase a total of 2.3% for all of 2013, indicating an expected increase in prices of 0.9% for the remainder of the year. Manufacturing Sector Summary

28 n Manufacturing employment is expected to increase 0.9% during the remainder of n Manufacturing revenues are expected to increase 4.8% in n Overall, manufacturing is expected to continue growing in Manufacturing Sector Summary (continued)

29 n Operating rate is currently 84.7% of normal capacity. n Production capacity is expected to increase 2.3% in n Capital expenditures are expected to increase 3.6% in n Prices paid increased 1.9% through the end of April n Prices are expected to increase an additional 0.5% over the remainder of the year, for a total 2013 increase of 2.4%. Non-Manufacturing Sector Summary

30 n Non-manufacturing employment is expected to increase 1.3% during the balance of n Non-manufacturing revenues are expected to increase 3.5% in n The non-manufacturing sector is projected to maintain the course of sustainable growth in Non-Manufacturing Sector Summary (continued)

31 n Bernard Baumohl, Chief Global Economist at The Economic Outlook Group