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2012 Semiannual 2012 Semiannual Forecast ReportForecast Report

December 11, 2012ISM 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 2004 – November 2012

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NMI 2008 - November 2012

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Non-Manufacturing Business Activity 2004 – November 2012

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Current Operating Rate

Percent of Normal Capacity

December 2012 77.5%April 2012 81.6%December 2011 79.2%

December 2012 85.4%April 2012 85.2%December 2011 85.2%

ManufacturingManufacturing

Non-ManufacturingNon-Manufacturing

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Production Capacity ChangeReported 2012 vs. 2011

Production Capacity Dec 2012

Mfg Non-Mfg+ 1.3%+ 3.2%

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Production Capacity:Manufacturing

Principal Means of Achieving Increases in 2012: Additional personnel (permanent, temporary

or contract) More hours worked with existing personnel Additional plant and/or equipment Replaced equipment with technically

advanced equipment

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Additional personnel (permanent, temporary or contract)

More hours worked with existing personnel Additional plant and/or equipment Replaced equipment with technically

advanced equipment

Production Capacity: Non-Manufacturing

Principal Means of Achieving Increases in 2012:

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Production Capacity ChangePredicted For 2013

Predicted Production Capacity

Mfg Non-Mfg+ 6.8% + 3.4%

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Capital Expenditures

Mfg Non-Mfg

+ 3.7% + 9.4%

Mfg Non-Mfg

+ 7.6% + 7.0%

Actual

2012 vs. 2011

Predicted

2013 vs. 2012

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Price Changes Mfg Non-Mfg

Dec 2012 + 0.8% + 2.7%

Reported Purchase Price Changes

End 2012 vs. End 2011

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Mfg Non-Mfg

April 2013 vs. End 2012 + 2.1% + 2.3%

End 2013 vs. End 2012 + 2.8% + 2.7%

December 2012

Predicted Purchase Price Changes

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Predicted Labor and Benefit Costs

Labor & Benefit Costs Mfg Non-Mfg

Dec 2012 + 1.7% + 1.9%

2013 vs. 2012

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Predicted Employment Change

Overall Employment Mfg Non-Mfg

Dec 2012 + 0.8% + 1.3%

End 2013 vs. End 2012

16Note: 81.4% of Manufacturing respondents export

Exports: Predicted Change FirstHalf 2013

ManufacturingManufacturing

17Note: 22% of Non-Manufacturing respondents export

Non-ManufacturingNon-Manufacturing

Exports: Predicted Change First Half 2013

18Note: 85% of Manufacturing respondents import

ManufacturingManufacturing

Imports: Predicted Change First Half 2013

19Note: 45.4% of Non-Manufacturing respondents import

Non-ManufacturingNon-Manufacturing

Imports: Predicted Change First Half 2013

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Business Revenues (nominal)

Mfg Non-Mfg

Reported 2012 vs. 2011 + 4.0% + 3.4%

Predicted 2013 vs. 2012 + 4.6% + 4.3%

December 2012

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Industries Predicting Growth in Revenues

2013 vs. 2012 — Manufacturing Primary MetalsPrimary Metals Petroleum & Coal ProductsPetroleum & Coal Products Computer & Electronic Computer & Electronic

ProductsProducts Wood ProductsWood Products Furniture & Related ProductsFurniture & Related Products Printing & Related Support Printing & Related Support

ActivitiesActivities Food, Beverage & Tobacco Food, Beverage & Tobacco

ProductsProducts Paper ProductsPaper Products

Chemical ProductsChemical Products Plastics & Rubber ProductsPlastics & Rubber Products Apparel, Leather & Allied Apparel, Leather & Allied

ProductsProducts Miscellaneous ManufacturingMiscellaneous Manufacturing Transportation EquipmentTransportation Equipment MachineryMachinery Nonmetallic Mineral ProductsNonmetallic Mineral Products Electrical Equipment, Electrical Equipment,

Appliances & ComponentsAppliances & Components Fabricated Metal ProductsFabricated Metal Products

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Industries Predicting Growth in Revenues

2013 vs. 2012 — Non-Manufacturing ConstructionConstruction Professional, Scientific & Professional, Scientific &

Technical ServicesTechnical Services Other ServicesOther Services Management of Companies Management of Companies

& Support Services& Support Services Real Estate, Rental & Real Estate, Rental &

LeasingLeasing Wholesale TradeWholesale Trade Retail TradeRetail Trade

Transportation & Transportation & WarehousingWarehousing

Accommodation & Food Accommodation & Food ServicesServices

Arts, Entertainment & Arts, Entertainment & RecreationRecreation

Finance & InsuranceFinance & Insurance InformationInformation Public AdministrationPublic Administration Health Care & Social Health Care & Social

AssistanceAssistance

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Mfg Non-Mfg

Better 40% 43%

Same 38% 41%

Worse 22% 16%

Diffusion Index 59% 63.5%

First Half 2013 vs. Last Half 2012

Business in 2013

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Second Half 2013 vs. First Half 2013

Mfg Non-Mfg

Better 46% 42% Same 44% 48% Worse 10% 10% Diffusion Index 68% 66%

Business in 2013

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Most Important Issues Facing Business

ManufacturingManufacturing Poor sales (37.8%) Government regulations (30.5%) Inflation (9.8%) Taxes (9.1%) Quality of labor (4.9%) Interest rates and finance (4.3%) Cost of labor (3.7%)

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Most Important Issues Facing Business

Non-ManufacturingNon-Manufacturing Government regulations (35.4%) Poor sales (22.2%) Cost of labor (10.4%) Inflation (9%) Interest rates and finance (9%) Taxes (7.6%) Quality of labor (6.3%)

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Manufacturing Most Cited ApproachesManufacturing Most Cited Approaches

Strategic sourcing/supply base rationalization

Inventory management and control

Process and information systems improvements

Supplier performance management

Demand planning to reduce supply lead times

Supply Chain Improvements 2013

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Non-Manufacturing Most Cited Non-Manufacturing Most Cited ApproachesApproaches

Strategic cost management

Process improvement

Strategic sourcing

Supplier relationship management

Professional development

Supply Chain Improvements 2013

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Change for 2013 vs. 2012

Mfg Non-Mfg

Expect to Increase 19% 12%

Expect No Change 60% 79%

Expect to Decrease 21% 9%

Diffusion Index 49% 51.5%

Predicted Inventory-to-Sales Ratio

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Business Outlook Next 12 Months

Mfg Non-Mfg

Better 42% 47%

Same 38% 31%

Worse 20% 22%

Diffusion Index 61% 62.5%

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Strength of the U.S. Dollar for 2013

ManufacturingManufacturing

Dec 2013 53.3%

Dec 2012 49.2%

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 2012 – Nov 2012

Mfg Non-Mfg

Better 34% 21%

Same 40% 44%

Worse 26% 35%

Diffusion Index 54% 43%

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Predicted Profit MarginsNov 2012 – Apr 2013

Mfg Non-Mfg

Better 28% 28%

Same 50% 53%

Worse 22% 19%

Diffusion Index 53% 54.5%

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Summary Manufacturing

Operating rate is currently at 77.5%. Production capacity increased by 1.3% in

2012. Production capacity is expected to increase

by 6.8% in 2013. Capital expenditures increased 3.7% in 2012. Capital expenditures are expected to

increase 7.6% in 2013.

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Prices paid increased 0.8% in 2012. Overall 2013 prices paid are expected to

increase 2.8%. Labor and benefit costs are expected to

increase 1.7% in 2013. Manufacturing employment is expected to

increase 0.8% in 2013. Expect growth in U.S. exports in 2013. Expect growth in U.S. imports in 2013.

Summary Manufacturingcontinued

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Manufacturing revenues (nominal) are up 4% in 2012.

Manufacturing revenues (nominal) are expected to increase 4.6% in 2013.

The U.S. dollar is expected to strengthen on average versus major trading partner currencies in 2013.

Overall attitude of manufacturing supply managers: optimistic, with 80% of respondents predicting 2013 will be the same as or better than 2012.

Summary Manufacturingcontinued

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Summary Non-Manufacturing

Operating rate is currently at 85.4%.

Production capacity increased 3.2% in 2012.

Production and provision capacity is expected to increase 3.4% in 2013.

Capital expenditures increased 9.4% in 2012.

Capital expenditures are expected to increase 7% in 2013.

Prices paid increased 2.7% in 2012.

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Prices paid are expected to increase 2.7% in 2013.

Labor and benefit costs are expected to increase 1.9% in 2013.

Non-manufacturing employment is expected to increase 1.3% in 2013.

Expect export levels to increase in 2013.

Expect import growth in 2013.

Summary Non-Manufacturing continued

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Summary Non-Manufacturing continued

Non-manufacturing revenues (nominal) are up 3.4% in 2012.

Non-manufacturing revenues (nominal) are expected to rise 4.3% in 2013.

Overall attitude of non-manufacturing supply managers: mostly positive outlook, with 78% of respondents predicting 2013 will be the same as or better than 2012.

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Questions