TRANSCRIPT
Lewis A Weiss (00:01.335)
Good day, everyone. This is Lew Weiss and Amy Nichlaus of Manufacturing Talk Radio. We’re here for our monthly show with Steve Miller, who’s the chair of the Institute for Supply Management Services Business Survey Committee Report. Whew! It’s a good thing you don’t have to wear that on the back of a football jersey. You’d have to have your arms like this.
Steve Miller (00:20.664)
Mm-hmm.
Steve Miller (00:25.516)
No kidding.
Lewis A Weiss (00:30.165)
So Steve, did a good job. We got a solid expansion, fifty four for the june twenty twenty six report. Give us the breakdown.
Steve Miller (00:40.46)
Yeah, it was it was great to see. the for the first time for the for the third time in twenty twenty six we had all four sub indexes that make up the PMI. both are all above fifty plus all above their twelve month average.
so really solid, really solid numbers. those are business activity, new orders, supplier deliveries, and employment. And so the big change was employment up more than three points, up to 51, so above where we’ve been for several months. so really good sign. The other sign is that we saw a little bit of a drop in the prices index as well, so down to 67.7, which is the first time out of 70. And so
Several months as well. So good sign, a lot of commentary around people starting to see gas, fuel, and diesel prices going down, although some are still seeing them elevated. so good mix there, showing a transition down to lower pricing from you know from a petroleum input type of thing. petroleum products, though, we see are are still elevated. So second month in a row, they came through.
Up in price. The one thing that was a little bit concerning was the increase in the number of items that look like they’re or that all are data center inputs are short supply. so wonder if that will be a little bit of a little bit of dampener in the growth of data center construction and maybe growth of AI, but we’ll see. It’s only it’s only
Amy (02:27.411)
feel like that was the same for manu the manufacturing report as well. Yeah.
Steve Miller (02:31.34)
Yeah. Yeah.
Lewis A Weiss (02:34.679)
One things that I I notice and to go back a minute, the pricing. It’s the hundred and ninth month of expansion. So is that never going down? I mean that’s nine years.
Steve Miller (02:48.386)
well we call that a depression when when prices go down. deflation is usually usually doesn’t accompany any positive economic activity. H slightly higher prices.
Lewis A Weiss (02:59.937)
So we should be rooting for higher prices.
Okay. Okay. Okay. Sounds good.
Amy (03:07.763)
Would you guys like me to share the actual chart from the report? Would that be helpful?
Steve Miller (03:15.447)
Sure.
Amy (03:16.681)
Okay, great. Yeah, I just thought maybe that would help for our viewers.
Lewis A Weiss (03:23.155)
there we go. How about it, Steve?
Steve Miller (03:24.599)
Yeah, very good.
Yeah, so you see see on when you look down that third column of percent so the the geography of the report, the services PMI numbers are on the left, and then the the final three columns are the manufacturing.
PMI as a reference point so you can see for similar indexes how they compare. Services is about ninety percent of the US economy and manufacturing about 10%. But if you’re not making stuff, you don’t need a lot of the services. So it’s it has an outsize impact even though it’s only 10% of GDP. When you look at the numbers that kind of stand out, if you look at that percent point change cost.
On the services PMI data, you see 3.3% or percentage points up for employment, and you see 11.3% down on inventories, and then next one up 3.6 percentage point increase in backlog of orders. So wonder if that backlog of orders is just what’s driving that employment increase. Where you know we’re we’re seeing we’re not
able to keep up with the new orders so we need to hire people, which is what it looks like in general. But we’ll we’ll continue to watch that and and and that’ll be a continued positive sign. On the inventories number it’s important, actually all the numbers, it’s important to understand it’s a diffusion index. So it’s looking at the number of companies reporting that they’re up or down and if more are reporting up than are reporting down or above 50. And
Lewis A Weiss (04:50.839)
Mm-mm.
Steve Miller (05:15.776)
Depending on their weighting for GDP. But if you’re at 50, you go down from 52 to 50, or in this case from 62 to 51. It doesn’t mean you’re going down. It means that less people are saying they’re going up. So 50 is flat on average. So that’s one thing that when you listen to news reports, they seem to get wrong often. That a down number doesn’t mean we’re shrinking, it just means we’re growing.
Slower if it’s above fifty.
Amy (05:48.075)
Okay. Okay. I think that makes a lot of sense. I like slower than shrinking. That sounds better to me anyway. We’re gonna we’re gonna keep I’m glad to hear that. So
Lewis A Weiss (05:48.407)
Got it.
Steve Miller (05:54.543)
Yes.
Lewis A Weiss (06:02.443)
The o the overall report is is clear that we’re still in the growing and expanding aspect of the economy. even though the it’s reporting that inventory sentiments are too high.
Steve Miller (06:13.763)
Yes.
Steve Miller (06:22.756)
yes, but but when you look at inventory sentiment over time, which I just happen to be able to do here, inventory sentiment at fifty two point six, saying we have too much inventory, is the lowest number we’ve had.
Steve Miller (06:43.23)
In at least two years.
Lewis A Weiss (06:45.769)
so that’s not terrible.
Steve Miller (06:47.672)
It’s not terrible. No.
Lewis A Weiss (06:49.537)
Okay. I always maintained looking at your report and certainly I’m not an expert, but anything between forty seven and fifty three is always the like the no man’s lands. I it’s like maybe we’re not sure what we’re talking about. But
Steve Miller (06:59.991)
Yeah.
Steve Miller (07:05.824)
I might make it a little bit tighter than that, Lew, but I think you’re right. You bounce around the fifty, you know, if you’re forty eight point seven, is it that much different than fifty one point one? yeah. Right. Okay, right, right. when you see inflections, you see something go from negative to positive by eight percent or something like that. That for me, that’s the kind of thing that makes me crazy. Yeah, or the other round. No.
Lewis A Weiss (07:15.691)
Yeah. I mean this is not a science, this is the best guess.
Lewis A Weiss (07:27.829)
Mm-hmm. That that’s crisis. That’s crisis. So let’s talk about some of the respondent comments, which I always find to be interesting and giving maybe even a better or additional insight into what the numbers really mean.
Steve Miller (07:38.178)
Okay.
Amy (07:49.139)
I I find them incredibly helpful as, you know, the the layman, if you will, or the you know, the everyday consumer who’s kind of looking and checking it out to get an idea of really what’s happening and taking your information as well is and what that response is. I I mean I did notice that, you know, the the droughts in Virginia are causing you know, a big problem. That’s not something that I would have necessarily equated to this, you know, the entire impact on the report itself. So I thought that was very interesting.
Steve Miller (08:18.146)
Yeah, so I try and do two things with the the quotes ’cause we get hundreds of comments each month on various different aspects, some indexes, some overall, what’s up and what’s down, or in short supply, that type of thing.
and what I try and do with the r the respondents is if we’re seeing something that’s a trend that lots of people are talking about, I try and make sure that we have some of those in there. And then if there’s some outliers as well that are in like the one you just brought up around Virginia, that was if you look at what’s happening, you go, Whoa, this is pretty significant. but it was only came through in one comment. but
Amy (08:59.304)
Okay. But yeah, it just it did sound it said it was like, wow, that really makes a lot of sense. I could see why that would be a big impact and not something I had really anticipated being in the report. So I thought those were great.
Steve Miller (09:08.566)
Yeah. And then when you look at when you look at the industries and what’s happening with the industries, you’ll see that agriculture is the bottom on the overall PMI. So they’re the fastest fastest contracting inventory or sorry inventory item industry in the survey.
Amy (09:31.55)
Okay. so that makes that that makes a lot of sense then.
Steve Miller (09:33.58)
So try to get those together so that people can see those. we saw less overall in the commentary this month around around the war and gas prices, fuel prices, but there still were some. and then we still see tariff commentary commentary coming through in terms of a cause for increased prices month over month.
Amy (09:58.197)
Okay. So what it
Lewis A Weiss (09:59.595)
Got gas I got gas this morning. Three dollars and fifty nine cents. That’s about a dollar cheaper than it was a month or two ago.
Steve Miller (10:09.846)
Yeah. Yeah, we’ve seen a thirty percent drop. at end of June crude prices got below seventy again for their first time since February. And and then you know who knows who knows where we go from here. Hopefully hopefully we can we get into the mid fifties back where it was at its low over the last several years.
Lewis A Weiss (10:17.463)
Mm-hmm.
Lewis A Weiss (10:33.271)
Okay, I mean.
Amy (10:33.42)
That would be good. Yeah, I was just I haven’t gotten I I don’t need to get gas because I have an electric car. So I only I keep track of it through through these reports and through Lew. I do. I do. But you it’s who knows. I mean the parts for those might be a problem, but you know, the mechanical or not I guess not mechanical, electrical parts might be a problem for those, but yeah.
Lewis A Weiss (10:44.715)
I’ll bet you have a Tesla.
Steve Miller (10:54.35)
Mm-hmm.
Lewis A Weiss (10:58.743)
So what what comments from your responders show certain concerns?
Steve Miller (11:05.058)
Yeah, so the the semiconductors, memory supply, those are those are two that come through. And then and then prices paid for for petroleum related products.
we saw that for the second time or a second month in a row in the commodities up in price, but then we also saw it in the commentary. Resins in particular. one of the respondents was buying ahead ahead for resins before they saw the full impact from oil prices that went up in March.
Amy (11:39.585)
I think it’s important to know and I actually, you know, I I don’t know if you’ve seen the show Landman. I’m waiting for the next season. But one of the points that they make in this show is that what most people don’t realize is that petroleum is in everything. Like it’s in your chapstick. It is I mean, really when petroleum when you see petroleum down, it’s across it it’s almost in anything that you have.
Steve Miller (11:55.55)
Everything. Yeah.
Amy (12:06.892)
I didn’t realize that, and I don’t think that most consumers realize that petroleum is not just what we’re not just talking about like gas.
Steve Miller (12:14.22)
Yeah, I think one of the other things that’s out there that’s a little bit certainly something that I wasn’t familiar with until I talked to a friend of mine who’s who is the CPO at a fertilizer company, is that the Ukraine war has had a has had a huge impact in availability and cost of fertilizer.
Amy (12:34.038)
Okay.
Steve Miller (12:34.066)
so you look in the agricultural industry, and you’ll see that in the commentary as well. costs for inputs for dairy and for some egg are above their prices that they can sell for. And one of the one of the contributors to that is either use of fertilizer availability f fertilizer to produce feedstock, and then fertilizer just to produce, you know, to help produce food.
Amy (12:59.317)
Okay.
Amy (13:04.776)
It’s crazy how it really all it’s so much bigger than just like that one thing.
Steve Miller (13:09.72)
Yeah, yeah.
Lewis A Weiss (13:10.709)
It it seems as though that the utility industry is continuing to have issues in terms of supply and shortages and price and so on. Does that look like it’s gonna continue?
Steve Miller (13:25.77)
It’s somehow they’re seeming to get past it because they’re still their growth is still fantastic. but that does it transformers, high voltage switches, and then s then when you go into basic materials like aluminum and copper. we’ve seen that on an ongoing basis, either up in in price or short supply.
I think some of the piping was an issue last month as well from a short supply standpoint. It didn’t come through in the for the commodities that we list, either up in price, down in price. We look for some consistency across multiple companies, not just one company mentioning it, but in the commentary we had one talking about that impacting utility build outs, utility or data center build-outs and utility build-outs.
Lewis A Weiss (14:13.655)
Mm-hmm, mm-hmm.
Lewis A Weiss (14:18.795)
So based on the report the way it is, and we are now in the deep part of the summer, is this going to continue in the positive trend that it seems to be?
Steve Miller (14:32.534)
А нармир from last month.
Lewis A Weiss (14:35.712)
Mm.
Steve Miller (14:36.652)
We were projecting good growth for the rest of the year and moderated pricing increases. where we had seen about I believe it was a seven point four percent increase year to date on prices paid. We’re projecting one point two percent for the rest of the year as a supply management community. with continued growth, continued capital investment. so all all really good signs in the mid year and then this month’s PMI information looks like it it
supports that.
Lewis A Weiss (15:08.641)
By the way, for the audience, last week or two weeks ago we did the ISM semi annual forecast with Steve and Susan Spence to be that were on our show. And it it’s all you know, an hour of great discussion and great talk about the futures. And it looks as though that the going forward six months is gonna be great and you’re
this month is only supporting that. So if you’re interested in hearing what’s going on in regards to the future six months or to through the end of the year, listen to last week’s show that we did. So
Steve Miller (15:53.025)
Lew, what I really like about liked about doing that is that Sue’s background is heavy manufacturing and some services. Mine’s heavy services and some manufacturing. So the ability to to be able to answer your questions thoughtfully and you have great questions, I think that made it really fun last month.
Lewis A Weiss (16:13.497)
great, great. Well there was a quarter of a million there were a quarter of a million people that watched it, so it must have done something. Yeah, we’re not CNN or MSN now or whatever, but we have a strong audience that tunes into the ISM report. So I I thank you and Susan for being on our show as regulars. And you have been since November fourth, twenty thirteen.
Amy (16:14.764)
Yeah, our listener our l reviewers thought so too. Yeah.
Steve Miller (16:35.534)
Sure.
Lewis A Weiss (16:41.907)
And our thirteenth year is coming up this coming November. Thirteen I haven’t done many things for thirteen years. Both my marriages, yes, but you know beyond that.
Steve Miller (16:49.07)
It’s my longest job.
Amy (16:58.461)
my gosh.
Lewis A Weiss (16:59.659)
So it it looks as though things are gonna be continuing going in that direction based on this report and also the semi annual forecast. So th that’s all d you know, really great stuff, unless, as economists say, something major changes. the only major change I see potentially is the end of the war. So let’s let’s f forecast on our own a little bit.
What happens if the war ends the day after tomorrow? I’m putting you on the spot, Steve.
Steve Miller (17:33.132)
Yeah, two two things.
Demand for transportation drops and fuel prices drop faster than they would already. Those are those are the two things that I think would be, you know, measurable and maybe a minor impact into wholesale trade.
Lewis A Weiss (17:51.596)
But
Lewis A Weiss (17:57.077)
If I’m not mistaken, the fuel pricing are not in the mix of inflation numbers, am I correct?
Steve Miller (18:05.784)
it depends which one you look at. It is it is included in our pricing number.
Lewis A Weiss (18:10.607)
okay. So if prices drop another fifty cents a gallon, inflation is also going to drop, correct?
Steve Miller (18:19.435)
from your mouth to God’s ears. We’ll see. You know, when when when interest rates got cut, mortgage rates went up. You know, that’s sometimes
Lewis A Weiss (18:22.903)
Yeah.
Amy (18:23.446)
Ha ha.
Lewis A Weiss (18:28.885)
Yeah. Some of that is called opportunistic pricing or gouging in some circles.
Steve Miller (18:32.374)
Yes. Sometimes nature defies yeah. Yeah.
Yeah, Lew, something about the the ability to sustain growth though. we’re I was looking at the numbers since since January, so twenty twenty-six numbers for the PMI. We haven’t seen a six month run like that since the second half of twenty two.
Lewis A Weiss (18:58.764)
Since the second half of
Steve Miller (19:00.138)
Second half of twenty twenty two. So July through December twenty twenty two is the last time we saw a six month average above where we are right now for the six month average. Yeah. Yeah, it seems like a really good sign.
Lewis A Weiss (19:02.314)
Really?
Lewis A Weiss (19:10.743)
That’s impressive.
Lewis A Weiss (19:16.091)
Very good, very good. I’m looking forward to talking more about it as the months go by. I w I wish to thank you, Steve, for your analysis and your report. Amy, do you have any final comments or words?
Amy (19:34.184)
No, I mean I think I just asked you the same thing I I ask you almost every time was that obviously we’re seeing a a great uptick and as a consumer, if I’m looking at the report, what would you what would you say that we should take it as it means for us as the consumer, not just as the you know, person that’s within this supply chain?
Steve Miller (19:55.765)
I for those of us that that you know are are early in our careers that are looking for you know future growth and growth potential, service industry looks like it’s a great place to be. Starting to see employment number come back and it seems to be because we’ve had sustained business activity and new order growth, seeing the backlog grow a little bit, it looks like we’re in we’re in for a good run.
so you know, now’s the time I think if you’re looking for your next gig, you know, or looking to contribute more where you are, it looks like in services industry is a great place to be.
Amy (20:33.132)
That’s great feedback. I love that. That’s a great way to close this out.
Lewis A Weiss (20:37.451)
Manufacturing also is a very strong place to be if you’re starting out in your career. you may get your hands dirty but you may be earning six figure incomes.
Steve Miller (20:50.594)
and you learn like crazy when you’re seeing how things everything supply chain if you’re a supply chain aficionado, seeing how it really works is really cool.
Lewis A Weiss (20:52.513)
That’s right.
Lewis A Weiss (20:58.773)
Right. I’m trying to talk my godson into going into underwater welding. You get to die you get to go swimming every day and make a hundred fifty thousand dollars a year. So that’s right. That’s right. That’s right. Well, I wish you again, thank you, Steve, and a great report. Keep up the good work. and we’re gonna see you next month. any parting parting words, Steve?
Steve Miller (21:11.278)
Yeah, make sure he stays in cold weather. Sharks are coming sharks are coming north.
Steve Miller (21:29.595)
stay cool if you’re on the east coast.
Amy (21:31.914)
Yeah, tell you telling me.
Lewis A Weiss (21:32.469)
Yeah. But you know what I you know what’s interesting? For the last four dis this is now July five. This is now the fifth day in New Jersey that they’ve been predicting four to five inches of rain. And it hasn’t happened yet. So that’s the good news. So
Steve Miller (21:34.336)
Yeah.
Steve Miller (21:47.662)
But a lot of people watched.
Lewis A Weiss (21:53.535)
That’s right, that’s right, ’cause they’re a fr they don’t want to be out in the maybe rain. So everybody’s keep listening to us. If you like the show, hit the like button. We really appreciate that. And we’ll see you next time.
Steve Miller (21:57.422)
That’s right.
Amy (22:07.446)
Definitely subscribe.
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