WEBVTT - ISM's Holcomb: All Indices Pointing in Right Direction (Audio) 0:00:03.360 --> 0:00:06.760 Global business news twenty four hours a day at Bloomberg 0:00:06.800 --> 0:00:09.840 dot Com, the radio, plus Globo LA and on your radio. 0:00:10.119 --> 0:00:14.280 This is a Bloomberg Business Flash from Bloomberg World Headquarters 0:00:14.320 --> 0:00:17.520 on Katherine Cowdery. This stock market is advancing for a 0:00:17.600 --> 0:00:20.560 fourth session, with the SMP five track for its best 0:00:20.560 --> 0:00:24.799 week since December. Investors are weighing new economic dat Empty 0:00:24.840 --> 0:00:28.200 Institute for Supply Management said that US manufacturing expanded for 0:00:28.240 --> 0:00:30.639 the fourth straight month in June as he outlook for 0:00:30.640 --> 0:00:34.360 new orders and production improved. Separately, the Commerce Department said 0:00:34.440 --> 0:00:37.200 US construction spending fell for a second month in May, 0:00:37.479 --> 0:00:40.960 reflecting weakness in all areas of building. We took the 0:00:41.000 --> 0:00:43.800 markets every fifteen minutes throughout the trading day on Bloomberg Radio. 0:00:43.800 --> 0:00:46.560 Down Industrial average is currently up sixteen points a tenth 0:00:46.560 --> 0:00:50.640 of a percent, trading at seventeen thousand ninety seven. SMP 0:00:50.720 --> 0:00:52.760 five fundered up three points an eighth of a percent 0:00:52.800 --> 0:00:56.080 at one one. The NASTAC is hired by thirteen points 0:00:56.160 --> 0:01:00.000 a quarter percent, trading at fifty five. West Texas Intermediate 0:01:00.040 --> 0:01:02.320 crude oil up forty cents of barrel seven eights of 0:01:02.360 --> 0:01:06.360 a percent at seventy four. Spockled up nineteen dollars twenty 0:01:06.400 --> 0:01:10.119 cents announced at and the tenure Treasury is up seven 0:01:10.160 --> 0:01:12.720 thirty seconds with the yield of one point four four percent. 0:01:13.160 --> 0:01:18.680 And that's a Bloomberg business flash. You're listening to taking 0:01:18.720 --> 0:01:22.759 stock with pim Box and Kathleen Hay's on bloom Bird Radio. 0:01:23.640 --> 0:01:27.440 US manufacturing looked like on the headline anyway, that it 0:01:27.560 --> 0:01:30.640 had a pretty good month in June. In fact, as 0:01:30.680 --> 0:01:34.160 a Bloomberg reports today, the fastest pace of expansion in 0:01:34.240 --> 0:01:36.920 more than a year. When you look at the latest 0:01:37.080 --> 0:01:40.840 survey from the Institute for Supply Management, They're key index 0:01:40.959 --> 0:01:44.760 rose to fifty three point to last month. That's above fifty, 0:01:44.840 --> 0:01:48.600 so it's above the level that signals that manufacturing is expanding. 0:01:48.600 --> 0:01:50.800 It's up from fifty one point three in May, so 0:01:50.840 --> 0:01:54.040 that's all good news. At the same time, the i 0:01:54.400 --> 0:01:58.280 s M had a special survey asking the purchasing managers 0:01:58.320 --> 0:02:02.320 it surveys across the country if they are concerned about Brexit, 0:02:02.360 --> 0:02:05.680 are they seeing any impact on orders for US manufactured 0:02:05.760 --> 0:02:08.960 goods and more? Joining us to dive into this very 0:02:08.960 --> 0:02:12.440 important question now, Brad Holcom, he's chairman of the Manufacturing 0:02:12.440 --> 0:02:16.040 Business Survey Committee at the I S and Brad, welcome back. 0:02:17.600 --> 0:02:20.280 Thank you very much, and happy fourth of July to 0:02:20.400 --> 0:02:23.440 you and everyone. I will I will say thank you 0:02:23.480 --> 0:02:25.519 into you two and of course all our listends of 0:02:25.840 --> 0:02:28.400 a lovely holiday we're celebrating this weekend. I actually want 0:02:28.400 --> 0:02:30.240 to start with a special question, Brad, why did you 0:02:30.240 --> 0:02:33.680 decide to issue a special question to the people in 0:02:33.720 --> 0:02:39.000 your survey? Well, we felt that this was potentially monumental 0:02:39.160 --> 0:02:43.960 and deserving of a special look at that question, I 0:02:44.000 --> 0:02:47.400 think it's surprised most and so we went up to 0:02:47.520 --> 0:02:51.640 our two panels, both on the manufacturing and non manufacturing side, 0:02:51.680 --> 0:02:56.240 with a series of questions related to Brexit specifically, what 0:02:56.320 --> 0:03:01.240 did you ask them? We asked them about, uh, their 0:03:01.360 --> 0:03:05.679 their view, initial view of the net financial impact of Brexit, 0:03:06.000 --> 0:03:09.400 and then some details around what might be the areas 0:03:09.440 --> 0:03:15.040 of concerns such as financial market uncertainty, currency movement, global 0:03:15.120 --> 0:03:20.000 growth and so on. Okay, and these are we might 0:03:20.040 --> 0:03:23.200 even think it's early days too for manufacturers to see 0:03:23.240 --> 0:03:25.320 an impact, but I guess after all the volatility that 0:03:25.360 --> 0:03:27.800 we see, maybe they're concerned about that. What did you 0:03:27.919 --> 0:03:29.760 What did they say? What is the majority of view 0:03:29.840 --> 0:03:33.400 or is there one? Well? Half a step back. The 0:03:33.520 --> 0:03:38.279 current monthly report that we'll get to was largely collected 0:03:38.360 --> 0:03:43.960 before the Brexit announcement, and so we'll talk about that later. 0:03:44.360 --> 0:03:48.080 So this special question, the upshot of it is, when 0:03:48.200 --> 0:03:54.560 asked about the net financial impact manufacturing eight percent at 0:03:54.560 --> 0:04:00.920 a negligible impact, a slightly negative impact, seven per cent 0:04:01.040 --> 0:04:05.960 negative on the flip side, set a slightly positive impact, 0:04:06.480 --> 0:04:11.560 so on the whole negative, negligible to slightly negative in 0:04:11.680 --> 0:04:13.960 terms of financial impact. And of course, with the basic 0:04:14.040 --> 0:04:16.080 question of basic worry, I guess would be that there 0:04:16.080 --> 0:04:18.880 will be a drop in export orders because economies overseas 0:04:18.960 --> 0:04:22.160 will be weak, and that will hurt the demand. Now, 0:04:22.320 --> 0:04:25.120 new export orders, one of the sub indexes of the 0:04:25.160 --> 0:04:28.760 I s M index, rose actually fifty three point five 0:04:28.800 --> 0:04:31.279 in June from fifty two point five in May. We 0:04:31.360 --> 0:04:37.120 also saw somewhat higher production, somewhat higher new orders, even employment. 0:04:37.160 --> 0:04:40.720 That number rose above fifty for the first time since 0:04:40.880 --> 0:04:45.600 November of last year. You know, virtually all the indexes 0:04:45.680 --> 0:04:49.000 are pointing in the right direction. New orders you mentioned 0:04:49.000 --> 0:04:52.760 at fifty seven point zero is the highest since December 0:04:52.760 --> 0:04:57.360 of fourteen, and production at fifty four point seven is 0:04:57.400 --> 0:05:02.520 the highest since July fIF So the three indexes, including 0:05:02.560 --> 0:05:06.200 p m I, have reached highs for a year to 0:05:06.360 --> 0:05:11.400 year and a half time frame. What's driving it? I 0:05:11.400 --> 0:05:14.039 think it's building on the momentum that we've seen for 0:05:14.120 --> 0:05:16.919 the last four to four to six months. In the 0:05:16.960 --> 0:05:20.880 case of the p m I, it's been growing consecutively 0:05:21.080 --> 0:05:24.839 for four consecutive months, new orders and production for six 0:05:24.880 --> 0:05:30.039 consecutive months each. And that follows a five month period 0:05:30.080 --> 0:05:32.240 of a down draft where the p m I was 0:05:32.400 --> 0:05:36.839 below fifty. So we turned the corner and moving forward, 0:05:36.920 --> 0:05:40.000 and it looks like we've got some some momentum here. 0:05:40.320 --> 0:05:43.920 So Brad Stanley Fisher, who's Vice chair of the Federal Reserve, 0:05:44.560 --> 0:05:49.680 spoke today and he indicated that the FED probably needs 0:05:49.680 --> 0:05:53.000 to wait and see what the impact of briggs it 0:05:53.240 --> 0:05:56.000 is on the global economy on the US economy for 0:05:56.160 --> 0:05:58.640 it starts making any move on rates. Uh. Do you 0:05:58.640 --> 0:06:00.840 agree with that? Do you think the Fed should actually, 0:06:00.880 --> 0:06:04.040 if manufacturing is doing reasonably well, should the Fed be 0:06:04.160 --> 0:06:09.080 considering another interest rate increase this summer or this fall? Well? 0:06:09.160 --> 0:06:11.480 I agree that we all need to kind of wait 0:06:11.520 --> 0:06:20.480 and see. Even even our special report and questionnaire gathers 0:06:20.600 --> 0:06:24.640 their initial view really in the in the early days 0:06:24.720 --> 0:06:29.480 of this situation, and we've already seen the stock market recover, 0:06:30.120 --> 0:06:33.080 so we might get a slightly different answer if we 0:06:33.080 --> 0:06:36.640 were to pull today. So the real answer is we 0:06:36.680 --> 0:06:39.560 don't know. But it could go up down our sideways 0:06:39.640 --> 0:06:42.640 in the short term. In the long term it certainly 0:06:42.640 --> 0:06:47.839 could mean, uh, you know, greater competitiveness in the UK, 0:06:48.120 --> 0:06:53.080 throughout Europe and globally as well. So um, in terms 0:06:53.160 --> 0:06:56.080 of growth, what kind of growth does this signal your 0:06:56.200 --> 0:06:58.400 your index of manufacturing? And next, because a lot of 0:06:58.400 --> 0:07:00.560 people been wondering if there aren't some signs of recession 0:07:00.640 --> 0:07:04.919 right now in the US economy, Well, let's let's first 0:07:04.960 --> 0:07:08.919 say that the economy has been growing for eighty five 0:07:09.040 --> 0:07:15.400 consecutive months according to our statistics and our correlations, and 0:07:16.080 --> 0:07:19.280 this year the average p m I has been fifty 0:07:19.320 --> 0:07:23.520 point eight with corresponds to two point increase in real GDP, 0:07:24.280 --> 0:07:28.160 and this month annualized at fifty two point three point 0:07:28.200 --> 0:07:31.000 two would correspond to a three point two So we're 0:07:31.000 --> 0:07:34.680 in the two to three percent area, uh, in terms 0:07:34.680 --> 0:07:37.160 of the g d P. Brad Holcombe, thank you so 0:07:37.320 --> 0:07:40.720 very much. From the Institute for Supply Management, This is 0:07:40.760 --> 0:07:48.280 taking stock and this is Bloomberg. Puerto Rico, Yes, they 0:07:48.320 --> 0:07:52.360 are going to default. What does it mean for investors 0:07:52.360 --> 0:07:55.400 who have continued to hold Puerto Rican paper? We're going 0:07:55.440 --> 0:07:58.200 to find out coming up. This is Bloomberg.