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ISM's Holcomb: Companies Continuing to Cut Inventories (Audio) · Bloomberg Intelligence

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  Speaker 1: up fourteen points two thirds of a percent to two
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  Speaker 1: thousand seventy nine, and as ZAC is up twenty nine
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  Speaker 1: point six tents of a percent at forty eight oh
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  Speaker 1: of barrel two point two percent to forty eight nine.
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  Speaker 1: and the Tenure Treasury down eight thirty seconds with the
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  Speaker 1: yield of one point eight six percent. And that's a
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  Speaker 1: Bloomberg business flash. He's taking stock with Kathleen Hayes and
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  Speaker 1: Grim Box on Bloomberg Radio. Economic activity in the manufacturing sector,
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  Speaker 1: What is it all about and what's happening? That's why
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  Speaker 1: we have Brad Holcomb. He is the chairman of the
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  Speaker 1: Institute for Supply Management. Joining us from Tempe, Arizona. Brat Holcomb,
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  Speaker 1: always a pleasure. Thanks for being with us, well, thanks
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  Speaker 1: for having me, all right, So give us the lowdown
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  Speaker 1: on economic activity in the manufacturing sector for April. What happened, Well,
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  Speaker 1: the p m I came in at fifty point a
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  Speaker 1: growing for the second consecutive month. We like that because
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  Speaker 1: if there's been six prior months of fifty or below fifty,
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  Speaker 1: so two months in a row of growth is certainly
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  Speaker 1: good news. And New orders and production are also growing,
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  Speaker 1: with fifteen of our eighteen industries reporting growth in those
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  Speaker 1: two categories new orders and production, even though their indexes
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  Speaker 1: are slightly down. All right, So that's the new orders
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  Speaker 1: and production. I want to get more into that, but
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  Speaker 1: first I want to get your thoughts on what energy
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  Speaker 1: and the collapse and energy prices. How does that read
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  Speaker 1: out of the I s M report. Well, let's go
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  Speaker 1: right to our prices index SAM. It's up seven and
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  Speaker 1: a half percentage points UH to fifty nine. That's two
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  Speaker 1: consecutive months of price increases following about a year and
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  Speaker 1: a half of price decreases, largely if not entirely, owing
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  Speaker 1: to the oil complex. So going in the in the
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  Speaker 1: right direction at er sort of deflationary prices, I think
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  Speaker 1: is the right thing. That's certainly reflected in our list
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  Speaker 1: of commodities up in price, which includes several of the
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  Speaker 1: medals as well as plastics that relate to oil demand,
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  Speaker 1: global demand particularly and relate that to the value of
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  Speaker 1: the US dollar force. Yes, exports meaning exports of finished goods,
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  Speaker 1: is at fifty two and a half nicely, about fifty
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  Speaker 1: up a half a point from last month. That factors
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  Speaker 1: into the new orders, which I discussed briefly, that's at
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  Speaker 1: fifty five eight, down two and a half overall. But nevertheless,
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  Speaker 1: fifty five point eight is good. I think the price
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  Speaker 1: of the dollar is certainly helping our exports, uh, in
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  Speaker 1: that the prices dollar has attenuated to some degree. And
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  Speaker 1: also I think there's some pent up demand from some
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  Speaker 1: prior softness in prior months. Our company cutting inventories. Yes,
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  Speaker 1: they're continuing to follow a lean, conservative inventory of raw
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  Speaker 1: materials policy. Uh. Forty five point five is the index
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  Speaker 1: number down a point and a half, contracting now for
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  Speaker 1: ten consecutive months. We saw in our December forecast that
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  Speaker 1: that was going to be a policy to watch. And
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  Speaker 1: it alone, that is inventories is pulling down the p
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  Speaker 1: m I more so than any other. The direct indexes
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  Speaker 1: tell us about some of the anecdotal evidence that you're
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  Speaker 1: hearing from the respondents of the survey. Let's start off,
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  Speaker 1: if we can with the computer and electronics industry. UH.
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  Speaker 1: This has to do UM with I guess demand. Is
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  Speaker 1: there enough demand out there well from the computer electronics products?
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  Speaker 1: Are specific comment is about oil prices, and while it
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  Speaker 1: says well, oil prices have recovered slightly. The industry is
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  Speaker 1: whole continuous to historically struggle greatly, which which we all
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  Speaker 1: know about now. Computer and electronics happens to be the
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  Speaker 1: largest of the eighteen industries that we follow, and petroleum
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  Speaker 1: and coal products is the fourth largest. So we're talking
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  Speaker 1: about big industries and the price of oils certainly have
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  Speaker 1: having a broad impact. I note also that we're talking
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  Speaker 1: about paper products later on in the program because of
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  Speaker 1: the news from International paper. I wonder if you could
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  Speaker 1: tell us a little bit about paper and wood products.
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  Speaker 1: Is also wood products has to do with housing. Yeah,
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  Speaker 1: Starting with wood products, our last comment listed is that
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  Speaker 1: the market is is starting to pick up as expected
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  Speaker 1: um and that could be certainly a time of year
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  Speaker 1: type of common for wood products. Then from printing and
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  Speaker 1: related the comment is activity increasing as we moved to
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  Speaker 1: our busiest season. So things are moving in the right
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  Speaker 1: direction for those two industreets. And to tell us a
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  Speaker 1: little bit about those commodities that have moved up in price,
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  Speaker 1: particularly steel, what's going on with steel prices? Yeah, steel
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  Speaker 1: prices are going up for the fourth consecutive months. That
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  Speaker 1: is steal specifically. Also we've got stainless steel coal rolled
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  Speaker 1: hot rolled steel as well. That relates to the price
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  Speaker 1: of oil and the amount of energy that it takes
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  Speaker 1: to produce steel, as well as the other metals on
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  Speaker 1: the list, and that includes aluminum and copper. And the
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  Speaker 1: backlog of orders and what does that tell us about
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  Speaker 1: the future. The backlog is growing for the second consecutive
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  Speaker 1: months at at fifty point five. That's good because production
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  Speaker 1: has not quite been able to keep up with both
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  Speaker 1: new orders and sort of seasoned orders, if you will.
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  Speaker 1: So it's a positive and sets us up as well
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  Speaker 1: as these other indirectors, I think, for more of the
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  Speaker 1: same looking forward in the short term. And finally, Brad
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  Speaker 1: Holcomb tell me about buying policies capital expenditures. How's that
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  Speaker 1: doing capital expenditures that we talked about. The time frames
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  Speaker 1: that it takes to order capital expenditures a hundred and
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  Speaker 1: twenty days to get to your order on average. That's
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  Speaker 1: down from a hundred and one so on far, but
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  Speaker 1: a little bit tight. Thank you very much. Brad Holcomb, Chairman,
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  Speaker 1: Institute for Supply Management, joining us from Tempe, Arizona. You're
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