–Non-Manufacturing to Grow Moderately in 2011
–Employment In Manufacturing Sector To Increase 1.8% In 2011

WASHINGTON (MNI) – The following is an excerpt from a release by
the Business Survey Committee of the Institute for Supply Management
Tuesday with projections from its Semiannual Economic Forecast:

Economic growth in the United States will continue in 2011, say the
nation’s purchasing and supply management executives in their December
2010 Semiannual Economic Forecast. Expectations are for a continuation
of the economic recovery that began in mid-2009. The manufacturing
sector continues to outpace the non-manufacturing sector and has greater
expectations for growth in terms of revenue, say the nation’s purchasing
and supply management executives in their December 2010 Semiannual
Economic Forecast.

The overall forecast projects optimism about the U.S. economy for
2011. The manufacturing sector, overall, is positive about prospects in
2011 with revenues expected to increase in 16 of 18 industries, while
the non-manufacturing sector appears slightly less positive about the
year ahead, with 12 of 18 industries expecting higher revenues. Business
investment, a major driver in the U.S. economy, will increase
substantially in the manufacturing sector, while investment in the
non-manufacturing sector will increase at a lower level.

These projections are part of the forecast issued by the Business
Survey Committee of the Institute for Supply Management (ISM). The
forecast was released today by Norbert J. Ore, CPSM, C.P.M., chair of
the ISM Manufacturing Business Survey Committee; and by Anthony S.
Nieves, C.P.M., CFPM, chair of the ISM Non-Manufacturing Business Survey
Committee.

Expectations for 2011 are positive as 65 percent of survey
respondents expect revenues to be greater in 2011 than in 2010. The
panel of purchasing and supply executives expects a 5.6 percent net
increase in overall revenues for 2011, compared to a 7.9 percent
increase reported for 2010.

The 16 manufacturing industries expecting improvement over 2010 –
listed in order – are: Primary Metals; Fabricated Metal Products;
Petroleum & Coal Products; Apparel, Leather & Allied Products;
Transportation Equipment; Miscellaneous Manufacturing; Furniture &
Related Products; Plastics & Rubber Products; Machinery; Textile Mills;
Wood Products; Electrical Equipment, Appliances & Components; Food,
Beverage & Tobacco Products; Printing & Related Support Activities;
Chemical Products; and Paper Products.

“Manufacturing purchasing and supply executives have expectations
for continued growth and are optimistic about their organizations’
prospects as they consider the first half of 2011, and they are even
more positive about the second half,” said Ore. “While 2010 has been a
year of recovery in manufacturing, our forecast sees improvements in
both investment and employment in 2011. Respondents expect cost
pressures in 2011 to be somewhat greater than in 2010. Manufacturing
growth is now in its 16th consecutive month as measured by and reported
in the monthly Manufacturing ISM Report On Business.”

In the manufacturing sector, respondents report operating at 80.2
percent of their normal capacity, up from 72.8 percent reported in April
2010. Purchasing and supply executives predict that capital expenditures
will increase by 14.5 percent in 2011, compared to a 5.9 percent
increase reported for 2010. Survey respondents also forecast that they
will reduce inventories in an effort to improve their purchased
inventory-to-sales ratio in 2011.

Manufacturers have an expectation that employment in the sector
will increase by 1.8 percent, while labor and benefits costs are
expected to increase an average of 1.9 percent in 2011. Manufacturing
purchasers are predicting strength in exports and imports in 2011. They
also expect the U.S. dollar to weaken on average against the currencies
of major trading partners.

The panel also predicts the prices they pay will increase 2.7
percent during the first four months of 2011, and will increase an
additional 1.3 percent during the balance of the year, with an overall
increase of 4 percent for 2011. Survey respondents expect to realize
supply chain improvements through improved inventory/asset management;
cost reduction; supplier development/better metrics; supplier
consolidation; and better risk management.

Non-Manufacturing Summary

Fifty-one percent of non-manufacturing supply management executives
expect their 2011 revenues to be greater than in 2010. They currently
expect a 3.4 percent net increase in overall revenues for 2011 compared
to a 0.2 percent increase reported for 2010. The 12 non-manufacturing
industries expecting revenue improvement in 2011 over 2010 – listed in
order – are: Mining; Transportation & Warehousing; Retail Trade;
Information; Wholesale Trade; Accommodation & Food Services; Management
of Companies & Support Services; Finance & Insurance; Utilities;
Educational Services; Other Services; and Health Care & Social
Assistance.

“Non-manufacturing supply managers report operating at 82.9 percent
of their normal capacity, below the 83.6 percent reported in April 2010.
They are optimistic about continued growth in the first half of 2011
compared to the second half of 2010, and they have a higher level of
optimism about the next 12 months than they had last December for 2010,”
said Nieves. “They forecast that their capacity to produce products and
provide services will rise by 2 percent during 2011, and capital
expenditures will increase by 3.7 percent from the 2010 level.
Non-manufacturers also predict that their employment will increase by
0.3 percent during 2011.”

Respondents in non-manufacturing industries expect that the prices
they pay for materials and services will increase by 3.1 percent during
2011. They also forecast their overall labor and benefit costs will
increase 1.1 percent for 2011. Profit margins are reported to have
decreased in the second and third quarters of 2010, and respondents
expect them to increase between now and April 2011. Survey respondents
indicate that process improvement is the most frequently cited means of
improving supply chains in 2011. Other improvement approaches include:
Enhancement and leverage of technology; product rationalization;
supplier management/consolidation; improved inventory management; and
strategic cost management.

** Market News International Washington Bureau: 202-371-2121 **

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