BREAKING: June ISM Report PMI

TRANSCRIPT

Lewis A Weiss (00:01.506)
Day everyone. This is Lew Weiss with Manufacturing Talk Radio with my co-host, Amy Nicholas. hi Amy. Good day. And we’re here with Susan Spence with the as the co chair, I’m sorry, the chair of ISM Manufacturing. welcome.

Amy (00:08.624)
Hi.

Susan Spence, Chair, ISM Manuf (00:23.021)
Thank you. Happy to be here.

Lewis A Weiss (00:25.066)
And thanks for coming back.

Okay. we have the report for June, and we’re gonna get right to that, but first I’d like you to give a 30-second explanation about the 19 since 1931 you’ve been sending out these reports for people so that you can create a report. So tell us just a little bit about that.

Susan Spence, Chair, ISM Manuf (00:52.345)
Sure. Since nineteen thirty one, someone, not me. I was not even born for thirty more years. yeah, the report has been out I think since the Hoover administration and my understanding of the history is the president wanted some

Lewis A Weiss (00:57.63)
Yeah.

Lewis A Weiss (01:06.488)
Yes, yes.

Susan Spence, Chair, ISM Manuf (01:10.113)
Indication of the economic health of the country in the middle of the depression or something like that. So really interesting history over 80 years. And what happens is once a month the ISM organization sends out a survey to hundreds of manufacturing sector panelists in 18 sectors of the U.S. economy. And these folks take a survey, answer questions about what’s going on with employment and prices and production and export.

And orders and backlog relative to the month before. And then twice a year they give a forecast of what they think’s gonna happen in the next year so that we can have a little bit of a longer view. So it’s really fascinating. And these panelists also can enter comments about what’s going on. So we certainly have numbers and and formulas where we will give the index as a result. As interesting as that is to

Lewis A Weiss (02:15.598)
Being that you mentioned about the semi annual forecast, which we had only about six days ago. So for the balance of twenty twenty six, it looks really like it’s going to go great guns in spite of a lot of uncertainty and all of that stuff. But also to pat ourselves a little bit on the back, we had two hundred and fifty thousand people that listened to your show. You and Steve, Steve Miller.

Susan Spence, Chair, ISM Manuf (02:41.058)
Mm-hmm. Yeah.

Yeah. Well we’re we’re really happy about that and you know, this isn’t a place for a personal opinion of mine or Steve’s other than when we sat in the chair, is this what we would have thought or is this how we would have reacted? but these are people that really do know what’s going on and what’s nice is when you can see a pattern across multiple multiple industries that have maybe nothing to do with each other. And we certainly saw that around tariff chaos last year and

the inability to hire because there was such unknown about what was gonna happen to prices if these tariffs happen or not. So with all of that, we did have a pretty good month, a little bit of a slowdown. If I may get into that, Lew.

Lewis A Weiss (03:28.214)
Amy’s gonna post the chart so that our audience can watch it as you talk about it.

Amy (03:33.948)
Sure.

Susan Spence, Chair, ISM Manuf (03:35.395)
So Amy will post a chart with a lot of numbers that I didn’t create, but were reported in a panelist, and this is a view we put in there. And I’m just gonna talk about trends. I like to talk about these sub-indexes with the category of demand, output, and input. Demand is new orders and new expert orders, backlog and customers inventory, output is production and employment, inputs is everything else.

Supplier deliveries inventory. So if we start with demand, we are still in an expansion with new orders and backlog, but we did lose some ground in growth. So, for instance, we went down in new orders, but we’re still above 50, so that’s good. new export orders did go back into contraction territory, unfortunately. And customer inventory’s lost ground, but that one is good because.

Because when inventories get too low, customers have to reorder. So two of those four subindexes are still in positive territory. On the output side, which is production and employment, that is mixed. Production is in its eighth month of expansion, which is great. Employment is still under 50, so it’s technically in contraction, but it’s gained another 1.1. It’s getting so close to 50, which we love. And on the input side, when supplier deliveries are above 50,

That means the supply chain is slowing down. In normal times, that means they’re busy and it takes longer to get product out and the lead times go up. But we saw supply chain congestion with things like the Strait of Hormuz closing or when tariffs were hitting last year and ports were getting congested. So this one, the supplier delivery could mean either of those things. We’re gonna assume that it it’s it’s okay right now. And inventory

Went back into expansion territory. So as new orders and production have stayed above 50, inventories are building a bit, so we think that’s good. The price index dropping 9.1. That is wonderful. Prices isn’t another input index. we’re down to 73. I think that’s the lowest for about four years. I I believe that was the statistic that was cited. So so it’s a good read, it’s a good.

Susan Spence, Chair, ISM Manuf (06:04.964)
Report for that reason, and I’m gonna take a breath and then tell you about sentiment based on all the comments.

Lewis A Weiss (06:11.702)
You know, just for g for a commentary on the can you bring that chart back up for a second,

Lewis A Weiss (06:24.942)
Okay, so in terms of the numbers, take a look at unemployment that it dropped it I’m sorry it went up, but it’s forty-nine seven. I I’ve always thought about and I’ve been doing these reports with the ISM now for over ten years. Any number that seems to be between forty-nine and fifty-one is sort of like no man’s land. It’s like is it really under fifty or is it really over fifty?

And it’s kind of maybe yes, maybe no. So when I see something like forty nine point seven, I’d I’d say that’s still okay.

Susan Spence, Chair, ISM Manuf (07:05.026)
Yeah, I I I think it’s you know it’s creeping toward fifty. it was I’m just looking down here because I want to look back to, you know, last year were some pretty scary employment numbers. pardon me one second while I flip. you know, I think at one point mid last summer was down around forty-three, wasn’t it? that was very, very scary. so in March it was forty-eight seven and went down to forty-six.

Lewis A Weiss (07:27.586)
Yes, yes.

Susan Spence, Chair, ISM Manuf (07:34.963)
Four back up to 486 497. But I think it was around the time Tim Fiori handed off the report writing to me. and it was it was in the 43-44 range. you know, people really were, we use the word frozen. People were frozen. They’re saying, I don’t know what’s gonna happen with tariffs, therefore I don’t know what kind of cost increase I’m gonna have to take on prices and raw materials, and therefore I better just hold on hiring people because my order streams are kind of dry.

Lewis A Weiss (07:45.729)
Yeah, it was terrible.

Susan Spence, Chair, ISM Manuf (08:04.996)
Up right, it was it was a lot of bad stuff going on. Then in December, we saw some slight optimism with the forecast on what revenue was gonna do. for instance, I think we thought or the the panelists had said in December that they saw a 4.4 percent increase in revenue for all of 26, which surprised me. It’s like despite the kind of awful year that went on with chaos and such, that they still think that’s.

Lewis A Weiss (08:07.448)
Right, right.

Lewis A Weiss (08:26.104)
Mm-hmm.

Susan Spence, Chair, ISM Manuf (08:34.816)
Is pretty interesting, and then you started seeing some of the expansion happen. Well, now they’re saying it’s gonna be 8.4 for the year, right? so likewise, prices they only thought were going up 5.4 percent when they were forecasting in December. It’s up to 12, but a lot of them are saying most of that we’ve already taken, and so it it does feel positive and optimistic. What are the things that can ruin it? Continued war.

Another round of tariffs, tariffs, and this is the month that the 150 days run out on. I think it was section 123 or 232. but as we start to see new tariffs being announced, gets me a little worried, unless they’re maybe around the 10% and within the confines of the law around tariffs versus something that just seems really egregious. So we shall see, but we’ve got some.

Some nice upward momentum, even if it’s slow down a bit. And the sentiment, if I may, the sentiment, if I look at all the comments, starting with general comments, the positive to negative last month for every positive comment, we had 2.7 negative general comments. This month, for every positive, we have only 1.9 negative. new orders, which is really demand sentiment. Last month it was 1.6 positive.

Lewis A Weiss (09:58.095)
Big difference.

Susan Spence, Chair, ISM Manuf (10:04.502)
Demand is good to one negative, it’s up to 2.7 positive to one. That’s a big deal. The positive comments on what’s happening in the manufacturers for production last month, 1.75 people commented positively to one negative. That’s up to two to one. new export orders, that’s the one that went down a little bit as far as numbers, but last month one positive comment to two negative. Now we’re 1.5 positive comments to

Amy (10:10.545)
Yeah.

Susan Spence, Chair, ISM Manuf (10:34.452)
one and the real big one the hiring versus managing your workforce meaning not bath filling or laying off last month was a relief because for every person hiring there was only one that wasn’t this month there’s one point eight people hiring or one point eight comments hiring to one that’s not so what’s a one point eight comment if I have a hundred comments that are positive and fifty negative I’m two to one it’s just it’s simple math

So those sentiment indexes have all improved and haven’t seen that, at least in my time. Yeah. So I’m I’m optimistic, yeah.

Amy (11:07.538)
Okay, that’s great. That’s great. So

Susan, let me ask you about we talked about this earlier. And as I was reading, you know, as we talked about what respondents were saying, I was reading one of the comments that was made, which was requests from suppliers in Europe and India for energy surcharges have stopped this past month, and we’re seeing continued capacity growth in Asia Pacific region, excluding China, including, and then it goes on. But one of the things that I didn’t understand and I thought would be good for our viewers to kind of get a good sense.

Yeah.

Susan Spence, Chair, ISM Manuf (11:46.093)
Yeah, so my assumption is when the oil shock happened, folks were starting to get hit with a surcharge. When I worked at FedEx, we had a fuel surcharge. We did not hedge

the price of jet fuel. At least when I was there we didn’t. I think they had done it years before. So what you do is you pass through whatever the increase is and you can either throttle it up when you need to or throttle it down, but you don’t you don’t affect the price of the product, right? So I’m assuming that this comment was around as energy and crude oil went way up and a lot of ancillary products went up, the fuel charges were passed along, right?

You saw, I think you see that someone was telling me they saw it on a their restaurant pill. It was you, Lew.

Lewis A Weiss (12:35.394)
Yeah. Yeah, it was.

Susan Spence, Chair, ISM Manuf (12:37.326)
Right. Or it was a merchant fee. Let’s not get Lew all wound up about that one again. But fuel, you know, transportation of food. It’s like if if I’m a small business owner, even a medium business owner, and I’m now getting a fuel surcharge from everyone delivering, you know, produce to my, you know, and meats or whatever, then eventually I’m gonna maybe pass it along because it’s not a small amount of money and it’s meant to be temporary. So I believe that that’s what this respondent might be talking about.

Amy (13:06.386)
Okay. All right. Makes a lot of sense.

Lewis A Weiss (13:06.806)
I mean Amy and I are here in New Jersey and as I pointed out to you a week ago, it seems as though that the reduction of gas here in New Jersey by about a dollar a gallon, which is significant, seems to be holding. a week ago it was under a dollar lower and still is as of this morning. So so th that’s some good stuff. But then again there’s California at seven dollars a gallon higher than everybody.

Susan Spence, Chair, ISM Manuf (13:28.867)
Yeah.

Amy (13:37.202)
Well and in New Jersey they will pump your gas for you. You don’t even have to get out of your car. So they have to.

Lewis A Weiss (13:41.858)
Ha ha ha.

Susan Spence, Chair, ISM Manuf (13:42.082)
Not only will they, but they have to ’cause if you’re not from Jersey and you’re you forget about that like I then pretend to be like, Get back in your car, ma’am. This is New Jersey and it’s a law.

Lewis A Weiss (13:48.492)
I think the reason why they

Amy (13:52.787)
The first time I came to New Jersey, that’s exactly what happened. They like, What are you doing?

Susan Spence, Chair, ISM Manuf (13:56.747)
Like I could I could pump my own gasology down.

Lewis A Weiss (13:58.265)
I think they do I think they do that in New Jersey ’cause they don’t think that we’re smart enough to pump our own gas.

Amy (14:04.768)
I doubt it. I doubt it. It’s nice though when it’s snowing. But and it’s also nice that our prices are so much less than California and we get the added benefit. But yeah. Yeah.

Lewis A Weiss (14:07.03)
Lewis A Weiss (14:16.76)
So give us a little bit more insight into some of these comments that we’re reading.

Susan Spence, Chair, ISM Manuf (14:23.278)
You know,

on my last interview, the comment from the transportation equipment provider about the two thirty-two tariffs was brought up. I put pick that one for a number of reasons. First of all, I like to always have comments from the big six, right? But this comment was the new two thirty-two tariffs continue to destroy our profitability and demand as we have to rape raise prices to deal with this gigantic tax. And this is the real interesting part. Add the inverse perverse.

incentives causing our company to pivot to purchase non-US source material. And I won’t read the rest of it, you can, because it’s a little bit of a poke in the eye.

It’s interesting, and that’s why I bring up replacement tariffs, right? so if they’re used for their intended purpose, especially if they’re meant to be temporary to drive a certain behavior, that’s one thing. But if you remember when the Supreme Court ruling happened in February, I I think there was more than one comment from representatives of the administration to say we’re we’re gonna find another way. and and I

understand the attitude but

Susan Spence, Chair, ISM Manuf (15:37.579)
Unfortunately, maybe it’s my oversensitivity having reading a year worth of comments to say not knowing what’s gonna happen next and when the other shoe’s gonna drop is just making us stand still. And that ain’t good because that means we’re not hiring people and our customers aren’t ordering and nothing good can come of that. Well, it feels like since February we’ve been coming out of that and even a war hasn’t really damped down the way we worried it would. I mean it has a bit, right?

So that’s why I say if we can have reasonable tariff policies come out of whatever the investigations are being done before the next announcements happen, and if the manufacturing companies can believe that’s what’s gonna happen and not change every other week, then I think we can keep going with this expansion.

Lewis A Weiss (16:31.094)
Even though, you know, expansion is, you know, it’s a it’s a s a big guess as to whether it’s gonna go up or down. But the point about employment, I think that companies tend to hold off employment until they’re convinced that there’s really an upturn. I think it’s I think it’s one of the last to improve. am I correct there?

Susan Spence, Chair, ISM Manuf (16:55.35)
Yeah. That’s what I’ve been seeing and having

sat in the seat of the purchasing manager. I too in my last few years at FedEx was, you know, impacted by the lack of an ability to backfill. And I understand it and actually agreed with it. It was painful for me and my team because we had lost 25% of the staff. But the company’s point was listen, you know, especially if there’s transformation going on, it’s very expensive to hire and train and deploy people.

Lewis A Weiss (17:19.382)
Susan Spence, Chair, ISM Manuf (17:29.988)
It could take up to a year depending on the skill you’re hiring for. So if you have uncertainty and you’re not sure what’s gonna happen with your revenue and your order stream, then you would rather wait on a backfill than hire someone to have to lay them off later, right?

Lewis A Weiss (17:47.116)
Yes, yes. Amy, I’m sorry, I think I interrupted you.

Amy (17:52.259)
said that makes a lot of sense. I mean you have to I mean big part of business is planning, no matter what size business you’re in, but

Lewis A Weiss (18:01.24)
on a go going forward basis, Susan, and you you did do the forecast just a six month forecast just a week ago and in combination with this report today for the month of June, what’s your overall continuing view of the futures?

Susan Spence, Chair, ISM Manuf (18:22.102)
Well, my view is to tell you what the view of six hundred, four hundred, five hundred you know, companies are telling us in the panelists. So every

Every percent increase has it is improved since December. So in December, the percent of respondents had predicted an employment increase back in December for for 2026. So in December 2025, the panelists told us that they expect a 0.4% increase in employment for all of 2026, like virtually nothing. Well, that’s tripled to 1.4. It’s still not a ton, but it’s

Lewis A Weiss (18:50.178)
Yeah.

Susan Spence, Chair, ISM Manuf (19:04.716)
Tripled is the point. Revenue for the full year of 2026 back in December, these panelists said 4.4% revenue pop. It’s a point for it. That doubled. That’s a big deal, right? And every other forecast for an increase, whether it was operating rate, production capacity, capital expenditures, is better. Prices, unfortunately, also doubled, right? So in December of

Amy (19:16.315)
Yeah.

Susan Spence, Chair, ISM Manuf (19:34.559)
2025 the panelists predicted that prices would go up in the first six months of 2026 by 5.4. Well they went up 11.9.

Lewis A Weiss (19:44.099)
Mm.

Susan Spence, Chair, ISM Manuf (19:45.293)
However, for the full year of 2026, the number is 14.1. That means that they already paid 12 of the 14%, and there’s only two more to go. So even that is good news. So the price increase have not only slowed down, but they feel that they’ve seen most of it already happen, which to me says the second half of the year ought to be really good. Unless

Lewis A Weiss (19:56.79)
Yeah.

Susan Spence, Chair, ISM Manuf (20:11.852)
you get this chaos again. And so, you know, economic policy is meant to incentivize, I suppose, with tariffs, countries to do or not do things. But

Lewis A Weiss (20:14.816)
It’s always the unless.

Susan Spence, Chair, ISM Manuf (20:26.306)
The very large numbers that get thrown out, and especially if it’s a negotiation tact, it whipsaws the the business community is what these panelists are telling us. And they told us that all last year. And we saw that in the numbers because they didn’t hire, they weren’t getting the orders, production was down, shuttering plants, sentiment was in the tank. and now it’s kind of reversing.

But I don’t expect you know, if if we had that chaos come back, I think the same thing would happen, right?

Lewis A Weiss (21:00.0)
I have I have one question and I don’t mean to make it sound like a a gotcha, but has there been any analysis done on your stats that based on the forecast that’s made today as to what the end result is six months down the road? I mean

Susan Spence, Chair, ISM Manuf (21:17.036)
Yeah. Yeah. Yeah, well you’ll see it if you if you re read the semi forecast report, in all these indexes it’ll say, okay, here’s what they said in December, here’s what it really was. And then in some cases they’ll say, here’s what was predicted in twenty twenty five and here’s what happened. So you could see how accurate or not it was. But it’s not accuracy, it’s this is what people thought was gonna happen, but this is what really happened.

Lewis A Weiss (21:31.48)
Mm-hmm.

Lewis A Weiss (21:41.804)
Right. Yeah, the emotionality as a as opposed to numerology.

Susan Spence, Chair, ISM Manuf (21:48.047)
Or or maybe not emotion, but you know, in December it really didn’t look great, but things have changed. Yeah. Yeah. And then guess what is great? Every month

Lewis A Weiss (21:54.488)
Yes, yes. So

Susan Spence, Chair, ISM Manuf (21:59.575)
you you get an update on that. That’s why, you know, you take this data with other data, but someone asked me, it might have been you, Lew. I don’t remember. if things are so dire, why is the stock market so great? It’s like, well, that’s looking backward three month or earnings, right? It’s looking at different things. you it’s a you know the stock market in some ways is a prediction on what the future’s gonna be, but these purchasing managers are seeing it every day and they should know.

‘Cause they’re getting the signals for demand and it’s either there or it’s not, right?

Lewis A Weiss (22:33.89)
And and these reports that you do on a monthly basis is basically reporting on what happened the last couple of weeks.

Susan Spence, Chair, ISM Manuf (22:41.132)
Right, what’s what’s ha actually what’s happening as compared to last month. So it’s very fresh data. I mean, it’s a lot of work for these survey takers to do this every single month. And having read hundreds and hundreds of comments, you know, some are short, but a lot of people are taking the time to say here’s what’s happening because they know that people look and read at the report and in some cases they’re hoping someone’s gonna listen and kind of believe the day and say, Despite what you want to have happen, here’s what

Lewis A Weiss (22:46.082)
Right.

Lewis A Weiss (23:00.374)
Yeah.

Susan Spence, Chair, ISM Manuf (23:11.116)
is happening, right? And same for services, right? So it’s good it’s good information, I think.

Lewis A Weiss (23:12.014)
Correct, correct.

Lewis A Weiss (23:18.222)
Good. Very good.

Amy (23:19.378)
Absolutely. Absolutely. So yeah, I think what you know, we really always appreciate you having you on. It is really great information. I think it’s really important that we get this new information every month because it’s, you know, makes a big difference on how, you know, we’re gonna take a look forward and how our businesses and our manufacturers that are, you know, looking at us or making their decisions. So it’s really great to have you on.

Lewis A Weiss (23:42.095)
But I just one comment. at one time I mean, we’ve been doing these shows with you now for almost thirteen years. I think this November is gonna be thirteen years. And one of the things that I’ve always noticed that when I had my metal distribution company where I sold raw materials to metal to manufacturers, that the stats always co coincided with

sales of in in my metal company. And it was always consistent. So I I would always be able to see sort of forecasting what next month’s sales are gonna look like based on what your what your panel has been telling us. So it’s

Susan Spence, Chair, ISM Manuf (24:28.16)
It it’s a it’s a great correlation. and when you have I said it in the beginning, when you have eighteen sectors as diverse as food, beverage, apparel, leather, let’s pour apparel leather guys. It’s not good right now. Because what’s expensive you know, what could you do without? You know, maybe some apparel. But when you see patterns across all, you know, there’s certainly differences, but then consistency, it’s like you know, you could ignore it at your peril. Right.

Lewis A Weiss (24:38.936)
Yeah yeah.

Lewis A Weiss (24:55.342)
So, as a wrap up, do you have any final comments beyond your past comments of the last few moments, which were very insightful?

Susan Spence, Chair, ISM Manuf (25:07.8)
Thank you, appreciate it. the thing I didn’t mention was the percent of manufacturing sector in contraction versus strong contraction. last month two percent of manufacturing sector GDP was in contraction, two percent in strong. It’s up to five and three now, but in early fall it was eighty-five percent in contraction. So I’ll take five and three any day, right? Yeah.

Lewis A Weiss (25:25.774)
Mm.

Lewis A Weiss (25:35.704)
You bet, you bet. Okay. Amy?

Susan Spence, Chair, ISM Manuf (25:37.474)
Yeah. Yeah.

Amy (25:40.7)
said my closing. I thought this was great. I think make sure to come back next month.

Susan Spence, Chair, ISM Manuf (25:46.2)
We’ll be back.

Lewis A Weiss (25:46.552)
Well, the one good thing that I have to report is that our air conditioning system is working. And considering it’s ninety plus degrees out here in New Jersey, but at least we’re not in Florida where it’s ninety five percent humidity, ninety five temperature. we’re gonna keep cool and I feel sorry for the people in Europe who are really suffering badly.

Susan Spence, Chair, ISM Manuf (25:53.591)
Ha ha.

Susan Spence, Chair, ISM Manuf (25:59.693)
Yeah.

Susan Spence, Chair, ISM Manuf (26:04.174)
That’s true. That’s true. That’s true.

Susan Spence, Chair, ISM Manuf (26:10.848)
Yeah. It’s bad. Yeah, it’s bad.

Lewis A Weiss (26:14.04)
But maybe they’ll buy into the concept of air conditioning, which they don’t have a lot of.

Susan Spence, Chair, ISM Manuf (26:19.202)
That’s a whole nother show.

Lewis A Weiss (26:20.79)
You bet. Maybe air conditioning companies should go over to Europe and create a new market.

Susan Spence, Chair, ISM Manuf (26:28.288)
All right, you guys, thank you so much.

Lewis A Weiss (26:30.816)
Hey Amy, that’s a wrap. We’ll see you next month.

Amy (26:34.065)
Hurrah.

Susan Spence, Chair, ISM Manuf (26:37.603)
Thank you.