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2011 Semiannual 2011 Semiannual Forecast ReportForecast Report

December 6, 2011ISM Business Survey Committees

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Speakers

Bradley J. Holcomb, CPSM, CPSD, chair of the ISM Manufacturing Business Survey Committee

Anthony S. Nieves, C.P.M., CFPM, chair of the ISM Non-Manufacturing Business Survey Committee

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PMI 2002 - November 2011

2002 - November 2011

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NMI 2008 - November 2011

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Non-Manufacturing Business Activity 2002 – November 2011

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Current Operating Rate

Percent of Normal Capacity

December 2011 79.2%April 2011 83.2%December 2010 80.2%

December 2011 85.2%April 2011 83.7%December 2010 82.9%

ManufacturingManufacturing

Non-ManufacturingNon-Manufacturing

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Production Capacity ChangeReported 2011 vs. 2010

Production Capacity Dec 2011

Mfg Non-Mfg+ 4.6%+ 1.1%

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Production Capacity:Manufacturing

Principal Means of Achieving Increases in 2011: Additional plant and/or equipment More hours worked with existing personnel Additional personnel (permanent, temporary or

contract) Fewer shutdowns of operations or facilities

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More hours worked with existing personnel Additional personnel (permanent,

temporary or contract) Additional plant and/or equipment Replaced equipment with technically

advanced equipment

Production Capacity: Non-Manufacturing

Principal Means of Achieving Increases in 2011:

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Production Capacity ChangePredicted For 2012

Predicted Production Capacity

Mfg Non-Mfg+ 5.6% + 3.2%

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Capital Expenditures

Mfg Non-Mfg

+ 11.0% + 4.0%

Mfg Non-Mfg

+ 1.9% + 0.1%

Actual

2011 vs. 2010

Predicted

2012 vs. 2011

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Price Changes Mfg Non-Mfg

Dec 2011 + 5.7% + 2.8%

Reported Purchase Price Changes

End 2011 vs. End 2010

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Mfg Non-Mfg

April 2012 vs. End 2011 + 2.0% + 2.1%

End 2012 vs. End 2011 + 2.9% + 2.7%

December 2011

Predicted Purchase Price Changes

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Predicted Labor and Benefit Costs

Labor & Benefit Costs Mfg Non-Mfg

Dec 2011 + 2.4% + 1.8%

2012 vs. 2011

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Predicted Employment Change

Overall Employment Mfg Non-Mfg

Dec 2011 + 1.3% + 1.1%

End 2012 vs. End 2011

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Note: 80.6% of Manufacturing respondents export

65.5

Exports: Predicted Change FirstHalf 2012

ManufacturingManufacturing

63.5

68.5

71.573.0 75.0 75.5 74.4

58.4

80.578

69.9

17Note: 29.1% of Non-Manufacturing respondents export

Non-ManufacturingNon-Manufacturing

Exports: Predicted Change First Half 2012

68.9

81

69

6567.5

69.5

76

7375

76.3

59.1

50

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18Note: 86.6% of Manufacturing respondents import

ManufacturingManufacturing

Imports: Predicted Change First Half 2012

65.564

61.5

73

8077.5 77.5

68.065.7

48.6

66.768.8

62.9

19Note: 49.6% of Non-Manufacturing respondents import

Non-ManufacturingNon-Manufacturing

Imports: Predicted Change First Half 2012

65.1

60.5 62

55.5

68

73.5

68.5

72.5

80.5

65.5

51.1

58

63.6

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Business Revenues (nominal)

Mfg Non-Mfg

Reported 2011 vs. 2010 + 7.0% + 1.5%

Predicted 2012 vs. 2011 + 5.5% + 3.1%

December 2011

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Industries Predicting Growth in Revenues

2012 vs. 2011 — Manufacturing Computer & Electronic Computer & Electronic

ProductsProducts MachineryMachinery Petroleum & Coal ProductsPetroleum & Coal Products Wood ProductsWood Products Nonmetallic Mineral ProductsNonmetallic Mineral Products Electrical Equipment, Electrical Equipment,

Appliances & ComponentsAppliances & Components Apparel, Leather & Allied Apparel, Leather & Allied

ProductsProducts Furniture & Related ProductsFurniture & Related Products

Transportation EquipmentTransportation Equipment Paper ProductsPaper Products Printing & Related Support Printing & Related Support

ActivitiesActivities Plastics & Rubber ProductsPlastics & Rubber Products Food, Beverage & Tobacco Food, Beverage & Tobacco

ProductsProducts Primary MetalsPrimary Metals Fabricated Metal ProductsFabricated Metal Products Chemical ProductsChemical Products Miscellaneous ManufacturingMiscellaneous Manufacturing

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Industries Predicting Growth in Revenues

2012 vs. 2011 — Non-Manufacturing Professional, Scientific & Professional, Scientific &

Technical ServicesTechnical Services MiningMining ConstructionConstruction Other ServicesOther Services Wholesale TradeWholesale Trade Agriculture, Forestry, Agriculture, Forestry,

Fishing & HuntingFishing & Hunting InformationInformation Retail TradeRetail Trade

Transportation & Transportation & WarehousingWarehousing

Arts, Entertainment & Arts, Entertainment & RecreationRecreation

Accommodation & Food Accommodation & Food ServicesServices

Real Estate, Rental & Real Estate, Rental & LeasingLeasing

Finance & InsuranceFinance & Insurance UtilitiesUtilities Public AdministrationPublic Administration

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Mfg Non-Mfg

Better 41% 35%

Same 43% 50%

Worse 16% 15%

Diffusion Index 62.5% 60%

First Half 2012 vs. Last Half 2011

Business in 2012

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Second Half 2012 vs. First Half 2012

Mfg Non-Mfg

Better 39% 37% Same 53% 53% Worse 8% 10% Diffusion Index 65.5% 63.5%

Business in 2012

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Most Important Issues Facing Business

ManufacturingManufacturing Poor sales (43.9%) Government regulations (22%) Inflation (17.4%) Cost of labor (4.5%) Quality of labor (4.5%) Taxes (4.5%) Interest rates and finance (3%)

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Most Important Issues Facing Business

Non-ManufacturingNon-Manufacturing Poor sales (34.4%) Government regulations (26.4%) Inflation (10.4%) Interest rates and finance (9.6%) Cost of labor (8.8%) Taxes (5.6%) Quality of labor (4.8%)

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Manufacturing Most Cited ApproachesManufacturing Most Cited Approaches

Supplier performance management

Strategic sourcing/supply base rationalization

Demand planning to reduce supply lead times

Inventory management and control

Process and information systems improvements

Supply Chain Improvements 2012

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Non-Manufacturing Most Cited Non-Manufacturing Most Cited ApproachesApproaches

Supply management process improvement

Leverage new and existing technology

Contract management

Professional development

Strategic sourcing

Supply Chain Improvements 2012

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Change for 2012 vs. 2011

Mfg Non-Mfg

Expect to Increase 17% 13%

Expect No Change 54% 68%

Expect to Decrease 29% 19%

Diffusion Index 44% 47%

Predicted Inventory-to-Sales Ratio

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Business Outlook Next 12 Months

Mfg Non-Mfg

Better 46% 44%

Same 38% 38%

Worse 16% 18%

Diffusion Index 65% 63%

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Strength of the U.S. Dollar for 2012

ManufacturingManufacturing

Dec 2012 49.2%

Dec 2011 44.1%

Average Diffusion Index for U.S. Dollar vs. 7 Major CurrenciesAverage Diffusion Index for U.S. Dollar vs. 7 Major Currencies

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Reported Profit MarginsApr 2011 – Nov 2011

Mfg Non-Mfg

Better 31% 27%

Same 32% 37%

Worse 37% 36%

Diffusion Index 47% 45.5%

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Predicted Profit MarginsNov 2011 – Apr 2012

Mfg Non-Mfg

Better 40% 32%

Same 41% 50%

Worse 19% 18%

Diffusion Index 60.5% 57%

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Summary Manufacturing

Operating rate is currently at 79.2%. Production capacity increased by 4.6% in

2011. Production capacity is expected to increase

by 5.6% in 2012. Capital expenditures increased 11% in 2011. Capital expenditures are expected to

increase 1.9% in 2012.

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Prices paid increased 5.7% in 2011. Overall 2012 prices paid are expected to

increase 2.9%. Labor and benefit costs are expected to

increase 2.4% in 2012. Manufacturing employment is expected to

increase 1.3% in 2012. Expect growth in U.S. exports in 2012. Expect growth in U.S. imports in 2012.

Summary Manufacturingcontinued

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Manufacturing revenues (nominal) are up 7% in 2011.

Manufacturing revenues (nominal) are expected to increase 5.5% in 2012.

The U.S. dollar is expected to weaken slightly on average versus major trading partner currencies in 2012.

Overall attitude of manufacturing supply managers: optimistic, with 84% of respondents predicting 2012 will be the same as or better than 2011.

Summary Manufacturingcontinued

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Summary Non-Manufacturing

Operating rate is currently at 85.2%.

Production capacity increased 1.1% in 2011.

Production and provision capacity is expected to increase 3.2% in 2012.

Capital expenditures increased 4% in 2011.

Capital expenditures are expected to increase 0.1% in 2012.

Prices paid increased 2.8% in 2011.

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Prices paid are expected to increase 2.7% in 2012.

Labor and benefit costs are expected to increase 1.8% in 2012.

Non-manufacturing employment is expected to increase 1.1% in 2012.

Expect export levels to increase in 2012.

Expect import growth in 2012.

Summary Non-Manufacturing continued

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Summary Non-Manufacturing continued

Non-manufacturing revenues (nominal) are up 1.5% in 2011.

Non-manufacturing revenues (nominal) are expected to rise 3.1% in 2012.

Overall attitude of non-manufacturing supply managers: mostly positive outlook, with 82 percent of respondents predicting 2012 will be the same as or better than 2011.

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Questions