TRANSCRIPT
Speaker 1 (00:00):
Welcome to Manufacturing Talk Radio, your Everything manufacturing podcast with host and veteran manufacturing industry expert Lewis Weiss and co-host Amy Nicklaus. Make sure to check out our catalog of 800 previous shows on YouTube, Spotify, or wherever you’re listening. Now, let’s get into the episode.
Speaker 2 (00:34):
Hello all. This is Lewis Weiss with Manufacturing Top Radio. I’m here with Amy Nicholas, my co-host, and we have Steve Miller from the Institute for Supply Management. Welcome aboard, Steve.
Speaker 3 (00:50):
Thank you. Great to be here. Lewis and Amy,
Speaker 2 (00:54):
We’re here today to talk about the March 26 ISM services, PMI Purchasing Managers index report.
They’ve sort of dropped the part out, but I am an old timer with this, so it’s the purchasing managers report. Steve, let’s get right to it.
Speaker 3 (01:15):
Great. We had another strong ish month with A PMI reading of 54. It’s down from last month slightly, but still above our 12 month average. So what we saw is a really good strength in new orders. We saw weakness in employment and we saw both the business activity and go down and the supply speed of supply actually slow down, which is an anomaly in our reporting is that that shows more strength. So slowing down is actually a number above 50, which implicates that businesses strong. Otherwise supply wouldn’t be slowing down in an environment like today. Maybe it’s a little different in that logistics are being impacted and that type of thing around the conflict of the Middle East. So those four average together make the PMI.
Speaker 2 (02:22):
It’s interesting that despite of price increases, that activity is still strong.
Speaker 3 (02:29):
And we saw across the board commentary around energy, fuel, diesel, gasoline, which had, let’s see, diesel fuel had 11 out of the last 13 months as down in price and gasoline had the last 12 months in a row as down in price, and both were the most frequently mentioned commodities up in price. Not a surprise, but up in price this month.
Speaker 4 (02:59):
I did see there, I just want to make a quick note. I did see there that in what the respondents were saying, that there was a mention about obviously the airline industry and what that means for airline pricing going
And I will say I am a direct consumer example of that in which I was looking to purchase a flight just this past week and the prices had almost doubled. I mean, it was obviously a very big flight. It was to another country, but it was pretty obvious. I had known somebody who’d booked that exact same flight the month before without quite as much of a cost increase there.
Speaker 3 (03:40):
Yeah. At my company, I’m responsible for travel, and so we’re seeing a significant increase in airline costs. As of last week, jet fuel was up 40% month over month.
Speaker 4 (03:53):
Wow. Okay.
Speaker 2 (03:56):
I’m going to throw something out there, and this is my personal opinion. Ever hear price gouging
Speaker 3 (04:06):
Or opportunistic pricing models?
Speaker 2 (04:08):
Yeah, opportunistic price. There you go.
Speaker 3 (04:12):
Yeah. That’s why the supply management function is so important because people will say, fuel went up by 40%. We need to increase your cost by 40%, even though fuel is 10% of the total cost of what’s being provided, either the service or the commodity.
Speaker 2 (04:28):
Right? Right. So it’s unfortunate, but that goes on. Any surprises, Steve?
Speaker 3 (04:36):
So I was surprised at how much the employment number dropped.
(04:42):
So the employment number is, I don’t have off the top of my head in terms of how low it is relative to history, but that size of a drop was significant and it’s the lowest number we’ve had in a while. My perspective in the services industry is you have a lot of constraints in terms of what costs you can manage temporary labor or contract labor is one that’s very easy to manage. Delaying hiring is another thing that you can do to help stretch the bottom line when you have issues and tends to be a short-term fix, but tends to be a fix that people pull the lever on quickly when they have uncertainty. So not a surprise that it went down, but I was surprised that it went down by that much a counterpoint. The jump in prices was also a bit of a surprise. I expected to see a three or four percentage point increase and it was a 7.7 percentage point increase.
Speaker 2 (05:49):
That’s a significant number going back to the increases in fuel prices, the likelihood is that that’s going to continue to go as long as the war continues to go. And I heard over the weekend that the threats from Iran now is that they’re going to close one other straight, unfortunately I forgot the name of it, but it’s in the north between the Mediterranean Sea and the north side of Iran. So with the threats that are going back and forth, I think they hold the cards.
Speaker 3 (06:35):
Yeah, I don’t have a great perspective on that other than there’s a lot of positioning going on at the moment, and we’ve, in many situations that we thought would end quickly that are maybe oversimplified, This transcript was exported on Apr 07, 2026 – view latest version here. but we’ll see. The time will tell. We’re pretty creative in terms of how we adjust our operations to accommodate increases in costs, be them labor or fuel, different energy, and when we run versus what the costliest times to run our manufacturing or run our services activities. We have alternate products that we can shift to if petroleum happens to be a high input cost for what we’re buying. So I expect to see as to continue to be creative and still hope that things from a humanitarian as well as an economic standpoint, things get resolved quickly.
Speaker 2 (07:38):
Just as a point of information. Prior to us jumping on this podcast, I ran, came out and said, no ceasefire, they want an end to the war. So I’m not sure what that exactly means because it doesn’t sound like that’s going to be likely that’s going to happen that way anyway,
Speaker 3 (08:01):
The same thing that happened in Gaza, right? There was a conversation around a ceasefire and people objected to cease fire because, and also discussions in Ukraine, you don’t want to cease fire because ceasefire just gives people a chance to build up or to rere prepare to fight when there’s a cessation and agreement to finish hostilities that works in everybody’s best interest.
Speaker 4 (08:30):
One of the things that I think that is not necessarily impacted by what’s happening in this war, and one of the things that was mentioned was the demand for AI computer infrastructure and how that seems to be resilient. Can you speak to that at all?
Speaker 3 (08:49):
The only thing that we see specifically is we’re seeing short supply on memory components as well as processors and computers. We’ve seen that for several months in and out of short supply or cost increases.
There’s been some recent developments around ai, which are projected to reduce the processing cost and processing power needed. So fingers crossed that that’ll go. But just personal experience, we have two AI data centers, which are being built within 50 miles of our house in Texas. So just that capacity and the utilities industry specifically within the services sector has been on fire for over 12 months.
Speaker 4 (09:40):
Okay. Wow. Alright. Alright. So if I may ask if as a consumer, if I wanted to really kind of simplify this report and say, okay, how is this going to affect me as a consumer? How would you maybe summarize it or say it in the layman’s term for somebody like me who’s just really wanting to understand, okay, we understand that this is for people who are in the business, but how are these things affecting me? Maybe how would you summarize that?
Speaker 3 (10:14):
Sure. So anything that has a significant component of cost, which is fuel. So you think about food to grocery stores got to be delivered by truck. The cost of storing, which requires refrigeration and cost of transportation into stores is going to be an impact. You should expect, even though food commodities have gone down recently, you should expect seeing food costs to go up in the grocery stores. The easy part is transportation and driving. You mentioned earlier flights, anything that requires jet fuel is going to have a significant increase. And what companies are doing is they’re buying inventory ahead to beat the cost impacts that are going to come with the increased fuel costs. So to the extent that you have an opportunity to buy something like booking flights now, maybe in a better idea if you have to fly in the next nine months to book flights, now it’s more of a hedge against what could happen if the strait gets shut down. I mean, we’ll see what $200 a barrel or $200 price of fuel or price of oil rather than a one 60, which is another what, another 25% increase. So it’s significant.
Speaker 4 (11:43):
Okay. So book your flights now,
Speaker 3 (11:46):
Book your flights. Now you may
Speaker 4 (11:49):
Preemptively do what you need to do before prices go up, but there still seems like there’s a lot of uncertainty. So we should all try and plan ahead as much as possible at this point.
Speaker 3 (12:00):
And the trick will be refundable versus non-refundable, how big of a gap that is because you’d like to play it if it’s not that big of a gap by refundable, and then if it goes down, you just rebook your ticket.
Speaker 4 (12:14):
Yeah, no, absolutely. I mean, I’m seeing that even with everyday consumer products that I would buy online where I used to be able to just send them back and it would be, you could refund it now it’s a restocking fee or a percentage of the refund, which is not something that really was as dominant as I see now with any kind of product.
Speaker 3 (12:37):
And the postal service just announced a package surcharge so directly related to the fuel costs.
Speaker 4 (12:44):
Oh yeah. So that’ll do it too.
Speaker 2 (12:47):
I’d like to clarify the index number. Typically anything over 50 is expansion and anything under 50 is contraction. However, over long periods of time, that number kind of shifts around a little bit. For example, the business activity and services for the last 21 months has been an expansion so that the number 50 is actually more like 48 and change 48,
Speaker 2 (13:19):
I think 0.1. So the expansion is significantly greater than from 50 to 54 because it’s really 48 to 54. So it’s really a significant number. I just wanted to clarify that for our public. So any final comments, Steve?
Speaker 3 (13:43):
I think it’s easy to get caught into some of the gloom that’s going around. We see across the services report, we’ve got 10 indexes. One of them is employment, it’s in contraction, all other nine are in expansion. We saw new orders expand significantly. A portion of that is probably resulting from people trying to buy ahead so that they avoid cost increases that are going to come through as fuel flows through.
And we did have a significant number of respondents who said, we are concerned about how that will impact our future costs. So it’s not all settled yet. So services economy is still proceeding well, it still has good strength, but big watch out is just how long will this go and how much will oil cost impact both consumer spending, which will then flow through to overall services, but also cost of goods.
Speaker 4 (14:46):
So it looks good right now, but to be continued.
Speaker 3 (14:50):
Yes, exactly.
Speaker 4 (14:51):
Okay.
Speaker 3 (14:53):
Kind of like where we were at the beginning of the tariffs discussion.
Speaker 2 (14:56):
However, my vodkas are beginning to cost more money.
Speaker 3 (15:01):
That’s right. Not The vodka,
Speaker 3 (15:03):
But bourbon is going down because demand for bourbon is, maybe it’s a time for a switch, Lewis.
Speaker 2 (15:08):
Maybe. Maybe even though I’m an old time vodka martini drinker.
Speaker 3 (15:14):
Okay. Okay,
Speaker 2 (15:16):
Folks, thanks for being here today, Steve. Thank you. My pleasure. Thanks for having me. You got other groups like Bloomberg and genre of news folks. Amy, thank you for being here and please tune into our shows on some kind of regular basis and come to our website manufacturing, spelled out manufacturing talk radio.com. Thank you all.
Speaker 1 (16:01):
Thanks again for joining us on another episode of Manufacturing Talk Radio with hosts Lewis Weiss and Amy Nicklaus. Before you head out, make sure to subscribe and leave us a review. For more information about the show and the manufacturing industry, head over to mfg talk radio.com. That’s M-F-G-T-A-L-KR-
A DIO o.com.
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