WEBVTT - ISM's Holcomb: Companies Continuing to Cut Inventories (Audio)

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<v Speaker 1>Global business news twenty four hours a day at Bloomberg

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<v Speaker 1>This is a Bloomberg Business Flash from Bloomberg World Headquarters.

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<v Speaker 1>I'm Catherine Cowery and Bloomberg Taking Stock is brought to

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<v Speaker 1>I see dr dot org. Well Stocks are starting a

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<v Speaker 1>new month with games, Banks are rebounding, and Amazon is

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<v Speaker 1>rallying for a second day after it's better than estimated earnings.

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<v Speaker 1>Wells Fargo and JP Morgan Chase are up one percent,

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<v Speaker 1>Haliburton is rallying, and Baker Hughes is declining after those

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<v Speaker 1>two ditch their twenty eight billion dollar merger. Energy producers

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<v Speaker 1>are slipping along with the price of oil. We checked

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<v Speaker 1>the markets every fifteen Minutestal industrial leverage is currently of

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<v Speaker 1>one nine points six tents of a percent, creating at

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<v Speaker 1>seventeen thousand, eight hundred eighty two. Smp F I founded

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<v Speaker 1>up fourteen points two thirds of a percent to two

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<v Speaker 1>thousand seventy nine, and as ZAC is up twenty nine

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<v Speaker 1>point six tents of a percent at forty eight oh

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<v Speaker 1>four less. Texas intermediate crude oil down a dollar three

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<v Speaker 1>of barrel two point two percent to forty eight nine.

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<v Speaker 1>Spot gold is up a dollar forty announced at twelve nine,

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<v Speaker 1>and the Tenure Treasury down eight thirty seconds with the

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<v Speaker 1>yield of one point eight six percent. And that's a

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<v Speaker 1>Bloomberg business flash. He's taking stock with Kathleen Hayes and

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<v Speaker 1>Grim Box on Bloomberg Radio. Economic activity in the manufacturing sector,

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<v Speaker 1>What is it all about and what's happening? That's why

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<v Speaker 1>we have Brad Holcomb. He is the chairman of the

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<v Speaker 1>Institute for Supply Management. Joining us from Tempe, Arizona. Brat Holcomb,

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<v Speaker 1>always a pleasure. Thanks for being with us, well, thanks

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<v Speaker 1>for having me, all right, So give us the lowdown

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<v Speaker 1>on economic activity in the manufacturing sector for April. What happened, Well,

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<v Speaker 1>the p m I came in at fifty point a

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<v Speaker 1>growing for the second consecutive month. We like that because

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<v Speaker 1>if there's been six prior months of fifty or below fifty,

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<v Speaker 1>so two months in a row of growth is certainly

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<v Speaker 1>good news. And New orders and production are also growing,

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<v Speaker 1>with fifteen of our eighteen industries reporting growth in those

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<v Speaker 1>two categories new orders and production, even though their indexes

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<v Speaker 1>are slightly down. All right, So that's the new orders

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<v Speaker 1>and production. I want to get more into that, but

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<v Speaker 1>first I want to get your thoughts on what energy

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<v Speaker 1>and the collapse and energy prices. How does that read

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<v Speaker 1>out of the I s M report. Well, let's go

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<v Speaker 1>right to our prices index SAM. It's up seven and

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<v Speaker 1>a half percentage points UH to fifty nine. That's two

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<v Speaker 1>consecutive months of price increases following about a year and

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<v Speaker 1>a half of price decreases, largely if not entirely, owing

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<v Speaker 1>to the oil complex. So going in the in the

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<v Speaker 1>right direction at er sort of deflationary prices, I think

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<v Speaker 1>is the right thing. That's certainly reflected in our list

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<v Speaker 1>of commodities up in price, which includes several of the

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<v Speaker 1>medals as well as plastics that relate to oil demand,

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<v Speaker 1>global demand particularly and relate that to the value of

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<v Speaker 1>the US dollar force. Yes, exports meaning exports of finished goods,

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<v Speaker 1>is at fifty two and a half nicely, about fifty

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<v Speaker 1>up a half a point from last month. That factors

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<v Speaker 1>into the new orders, which I discussed briefly, that's at

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<v Speaker 1>fifty five eight, down two and a half overall. But nevertheless,

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<v Speaker 1>fifty five point eight is good. I think the price

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<v Speaker 1>of the dollar is certainly helping our exports, uh, in

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<v Speaker 1>that the prices dollar has attenuated to some degree. And

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<v Speaker 1>also I think there's some pent up demand from some

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<v Speaker 1>prior softness in prior months. Our company cutting inventories. Yes,

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<v Speaker 1>they're continuing to follow a lean, conservative inventory of raw

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<v Speaker 1>materials policy. Uh. Forty five point five is the index

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<v Speaker 1>number down a point and a half, contracting now for

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<v Speaker 1>ten consecutive months. We saw in our December forecast that

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<v Speaker 1>that was going to be a policy to watch. And

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<v Speaker 1>it alone, that is inventories is pulling down the p

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<v Speaker 1>m I more so than any other. The direct indexes

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<v Speaker 1>tell us about some of the anecdotal evidence that you're

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<v Speaker 1>hearing from the respondents of the survey. Let's start off,

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<v Speaker 1>if we can with the computer and electronics industry. UH.

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<v Speaker 1>This has to do UM with I guess demand. Is

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<v Speaker 1>there enough demand out there well from the computer electronics products?

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<v Speaker 1>Are specific comment is about oil prices, and while it

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<v Speaker 1>says well, oil prices have recovered slightly. The industry is

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<v Speaker 1>whole continuous to historically struggle greatly, which which we all

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<v Speaker 1>know about now. Computer and electronics happens to be the

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<v Speaker 1>largest of the eighteen industries that we follow, and petroleum

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<v Speaker 1>and coal products is the fourth largest. So we're talking

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<v Speaker 1>about big industries and the price of oils certainly have

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<v Speaker 1>having a broad impact. I note also that we're talking

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<v Speaker 1>about paper products later on in the program because of

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<v Speaker 1>the news from International paper. I wonder if you could

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<v Speaker 1>tell us a little bit about paper and wood products.

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<v Speaker 1>Is also wood products has to do with housing. Yeah,

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<v Speaker 1>Starting with wood products, our last comment listed is that

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<v Speaker 1>the market is is starting to pick up as expected

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<v Speaker 1>um and that could be certainly a time of year

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<v Speaker 1>type of common for wood products. Then from printing and

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<v Speaker 1>related the comment is activity increasing as we moved to

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<v Speaker 1>our busiest season. So things are moving in the right

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<v Speaker 1>direction for those two industreets. And to tell us a

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<v Speaker 1>little bit about those commodities that have moved up in price,

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<v Speaker 1>particularly steel, what's going on with steel prices? Yeah, steel

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<v Speaker 1>prices are going up for the fourth consecutive months. That

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<v Speaker 1>is steal specifically. Also we've got stainless steel coal rolled

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<v Speaker 1>hot rolled steel as well. That relates to the price

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<v Speaker 1>of oil and the amount of energy that it takes

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<v Speaker 1>to produce steel, as well as the other metals on

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<v Speaker 1>the list, and that includes aluminum and copper. And the

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<v Speaker 1>backlog of orders and what does that tell us about

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<v Speaker 1>the future. The backlog is growing for the second consecutive

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<v Speaker 1>months at at fifty point five. That's good because production

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<v Speaker 1>has not quite been able to keep up with both

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<v Speaker 1>new orders and sort of seasoned orders, if you will.

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<v Speaker 1>So it's a positive and sets us up as well

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<v Speaker 1>as these other indirectors, I think, for more of the

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<v Speaker 1>same looking forward in the short term. And finally, Brad

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<v Speaker 1>Holcomb tell me about buying policies capital expenditures. How's that

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<v Speaker 1>doing capital expenditures that we talked about. The time frames

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<v Speaker 1>that it takes to order capital expenditures a hundred and

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<v Speaker 1>twenty days to get to your order on average. That's

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<v Speaker 1>down from a hundred and one so on far, but

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<v Speaker 1>a little bit tight. Thank you very much. Brad Holcomb, Chairman,

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<v Speaker 1>Institute for Supply Management, joining us from Tempe, Arizona. You're

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<v Speaker 1>listening to taking Stock on Bloomberg Radio. Coming up on

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