TEMPE, ARIZ . — The Institute for Supply Management recently issued two reports – each reflecting mixed emotions on economic numbers and projections.

ISM's 65th Semiannual Forecast for the second half of 2003 expressed optimism, albeit somewhat guardedly.

Those surveyed by ISM expect economic growth to continue in '03, though not exactly in leaps and bounds.

Purchasing and supply executives surveyed say they anticipate '03 revenues to show modest improvement over last year, with an overall growth of 1.9 percent.

Industries showing the most optimism were paper, chemicals, food, transportation and equipment, wood and wood products, electronic components, and rubber and plastic products.

These industries did admit to concerns, however, citing several of the usual economic suspects such as healthcare costs, the effects of the Iraq war and energy costs, as well as inflation and interest rates.

On the non-manufacturing end of things, ISM's survey found that 58 percent of non-manufacturing supply and purchasing executives expect 2003 revenues to be greater than those in '02. Overall, they anticipate an increase of 5.4 percent – an improvement over the 0.9 percent increase reported in 2002.

The most optimistic industries are real estate, transportation and other services, including hotels and lodging, personal services, auto repair, engineering and accounting, among others.

When surveyed for their thoughts on profit margins, manufacturing purchasers expected a 44 percent increase in profit margins for the balance of '03. And while 18 percent were anticipating lower margins, 38 percent thought their margins would remain the same.

These numbers were encouraging in comparison to the fourth quarter of 2002 and first quarter of 2003, when 26 percent of those surveyed said their profit margins increased, while 37 percent reported lower margins and another 37 percent said their profit margins did not change.

One continuing negative finding, though, was the overall view that employment in manufacturing will decline. Those responding to ISM's survey said employment would decline 0.5 percent for the remainder of 2003 – despite the 20 percent who believe '03 employment will be 7.8 percent higher. Industries anticipating the most job cuts: rubber and plastic products, primary metals, furniture, and electronic components and equipment.

The projections were part of a survey conducted by ISM's Business Survey Committees.

In another of its reports, ISM's Manufacturing Report on Business®, the mixed bag continued, as ISM found that while economic activity in manufacturing failed to grow in May, 2003, the overall economy grew for the 19th consecutive month.

The PMI rose to 49.4 percent in May, an increase of four percentage points from April. (A reading of 50 percent or better means that the manufacturing economy is generally expanding.)

However, there is a cloud around this silver lining: the survey found that the PMI indicated, overall, that the manufacturing economy declined in May for a third consecutive month.

Norbert Ore chaired the ISM's manufacturing business survey committee. While not downplaying the manufacturing sector's third month of decline, he pointed to the New Orders and Production Indexes, where things looked better.

"There are signs of life in manufacturing, as both the New Orders Index and Production Index rose above the 50 percent mark, after each had seen two consecutive months of decline," he said.

The New Orders Index hit a reading of 51.9 percent in May, up from 45.2 percent in April. Likewise, improvement was reflected in the Production Index: 51.5 percent in May, an increase over April's 47 percent.