The Mickey Perspective: What do the ISM Numbers Tell Us (Part 2)

In the first post in this series, we shared some of Mickey North Rizza's observations on the August manufacturing PMI numbers while also offering our perspective on how best to apply PMI data in context. Today, we'll offer our own take on the numbers and related data, which do not paint quite as bleak a picture for manufacturing as Mickey suggests.

In the October edition of Surplus Record, which went to press this week, Lisa Reisman and I observed in our monthly editorial that, "Much of global manufacturing is currently in decline (as measured by month-over-month numbers). According to ISM's Manufacturing PMI data released in early September, August saw the third straight month of contraction ... [moreover] there are a number of fundamental challenges underlying the current economy, including a continued high unemployment number. Gallup's latest seasonal adjusted number for August stood at 8.1%, representing 'a slight uptick from 8.0% at the end of July' according to the research and polling firm."

Yet other indicators are not as negative. In fact, if you turn your attention to underlying transactional pricing data in the industrial metals markets, the story becomes more complicated and less black and white. In this regard, we observe that,

MetalMiner MMI® index data suggest that sectors that were previously falling in the summer months appear to have found a floor in early September data. Among other metals indexes, MMI pricing data suggests material demand for rare earth metals (often used for high-tech manufacturing applications as well as A&D and other sectors), aluminum and metals used in the renewables sector (steel plate, neodymium, silicon, etc.). The MetalMiner Raw Steels MMI® also presented a slight uptick. From a global manufacturing perspective, perhaps the best news in the September MetalMiner MMI data is that it was not just global precious metals (e.g., gold, copper) contributing to an uptick in pricing. The MMI indexes [also] suggest broader metals market demand for construction and automotive. Although other signals may indicate a weakening manufacturing economy, it is not being reflected in the pricing for metals going into certain industries – at least not yet.

Economists love to obfuscate -- and even lie -- with data. What's the moral of the procurement story? Don't ever rely on a single indicator, PMI or otherwise. Markets are complicated. If you want to understand the manufacturing economy as part of your own forecasting and planning efforts, dig deeper than just a single indicator to form a more informed perspective.

And as Mickey suggests in her post, "Creating a path of success requires strategies that allow one to pull back or push forward quickly when circumstances require. Utilizing leading indicators to forecast possibilities, followed with actions to meet the requirements creates an agile supply chain that meets today's business requirements – or tomorrow's." Just be sure to factor in the right set of indicators!

- Jason Busch

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