The March ISM report on manufacturing is right on schedule to our macro view
Manufacturing is not a laggard, like a lot of the inflation stuff and services-related employment still nagging the headlines. Manufacturing, along with transport/shipping, Semiconductors and certain Technology areas are where the rubber meets the road, economically speaking.
The March ISM report was not good. Not at all. Especially for those still chasing the inflation hysteria manufactured in 2020. Commodities go into manufacturing processes. Metals, materials, chemicals, energy/oil, lumber, and so on.
The full ISM report is available here. But let’s take a look at a few of the key components of the deceleration.
First, the overall PMI is in recession.
New orders are in recession.
Customer inventories are building, implying a coming recession in demand.
Prices paid are trending down. No cost-push inflation going on here.
Backlogs are shrinking as demand shrinks.
As you may or may not know, my professional life used to be governed by the implications of data like that from ISM. I was a manufacturing guy. While I steered us to a predominantly Healthcare related customer base, it was still important to know whether the wider manufacturing sector was expanding or contracting. But sure as shootin’, if the other guy is getting desperate he may show up at your customers’ doorsteps with great price deals. In other words, the competition can get pretty cutthroat.
All in all, the above is a picture of one of the first ‘cost-pushed’ inflation receivers now going the other way. The lagging jobs and in particular services jobs should follow.
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