ISM's Timothy Fiore Discusses The January 2024 Manufacturing PMI | Confident Negotiator Podcast #2

By RED BEAR February 13, 2024 | 29 min read

In the latest episode of the Confident Negotiator Podcast, host Rob Cox is joined by Tim Fiore, the Chair of the Institute for Supply Management's Manufacturing Business Survey Committee. This episode delves into the intriguing findings of the January Manufacturing PMI, offering listeners an insightful discussion on the current state and future outlook of the manufacturing sector. 

Tim's team's recent release of the PMI data suggests a potential shift toward expansion after a prolonged period of contraction, marking the longest such period in two decades. The conversation explores the underlying factors contributing to these developments, including the impacts of the pandemic, inventory levels, and economic forecasts. Tim also shares his expert analysis on the possible trajectory of the manufacturing sector and the broader implications for the economy. This episode is a must-watch for anyone interested in understanding the complexities and dynamics of the manufacturing industry, uncovering the nuances behind the January PMI data. Tune in to gain valuable insights in the field of manufacturing and negotiation.

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Transcription of the Video:

Rob Cox: Hello everyone and welcome to the Confident Negotiator Podcast. I'm Rob Cox, and with me today is the Chair of the Institute for Supply Management's Manufacturing Business Survey Committee, Tim Fiore. Tim's team released the January Manufacturing PMI this month. Tim, thank you so much for joining us.

Tim Fiore: Yeah, thanks for having me, Rob. You bet. Good to be here.

Rob Cox: Now, we have a few questions about this month's PMI. So I'll dive right in. My first question for you, Tim, after so many months of contraction, there's a lot of noise about possible positive indicators for the manufacturing sector. What can we take away from the January PMI data relative to a possible expansion and what else would you need to see to confirm the start of a manufacturing sector expansion?

Tim Fiore: Well, okay, so a little bit of background Rob. We've been running in a manufactured contraction for about 15 months. That is the longest contraction that we've had in 20 years. Outside of the great recession, our contractions usually last six to nine months. So this thing is already elongated beyond the normal and there's been nothing normal about the last three plus years around the pandemic. Surprises continue to come up, including what's happening here as we recover from the huge spike in demand several years ago. The massive amount of over ordering the large amounts of inventory, total inventory and the entire channel from the shelf all the way back to the mine and now the normalization to try to get back to a normal demand environment. So the generally PMI, oh by the way, we do a twice a year forecast for the economic community manufacturing community business community.

We did a comprehensive forecast in December and we updated in May and at the top level here, we said we're going to grow in 2024, about 5% on the revenue side. We're going to be more profitable. We've let go about 2% of our employees in the last six months of last year, but by the time we get to the end of 2024, we'll add them back. We undershot our capital expense projections, but we're going to make up for that in 2024. We didn't expand our production capacity like we thought we would, but we're going to make up for that in 2024 and our operating rate is at one of the lowest levels that we've been at since in the last six years anyway, and that's kind of the numbers that I'm looking at. So that's the backdrop for January. We released that forecast on January 15th.

On January 14th, Chairman Powell got on TV and said, oh, we think we've capped out on rate increases. And in fact, you may see two to three decreases as 2024 proceeds. Well, so the forecast information I just gave you was without the benefit of Chairman Powell saying we're at the top now. He said two things, we're at the top and number one, number two, we're going to cut rates. Those are two separate things. So keep that in mind as we go into 2024. So along comes January, well actually December our PMI did pretty well. I mean I've been saying that since August of last year we've been in the trough. And the reason I've been saying that is because what makes a PMI manufacturing PMI really unique is that it's highly cyclic and it's highly responsive, meaning it responds quickly and it moves significantly in the last 15, 18 months.

We've moved very slowly. We're moving less than one point every month and that's just not the way it normally is in manufacturing. We never really got below 46 5. A really urgent situation is 43. You see a PMI down in the 43 range get nervous because it means that the whole economy's coming. We never got near there. 46 is nowhere near 43, and I kept a real close eye on that 45 warning break line. So along comes January and with the benefit of what four weeks of Chairman Powell saying that we're at the top of the rate structure, the PMI panelists respond with a really good report. We came in at 49 1, I think that number was, economists said we were going to commit at 47 3, something like that, slightly better than the prior month of December 47, 4. That 49 1 was a surprise to me, no doubt.

When Chairman Powell said we're at the top of the rate cycle, I figured by the time we hit February March, you're probably going to see a PMI above 50 and I still feel that way, but I didn't feel that demand was going to really come back as strong as it did in January as it did. So that's part of one of your other questions here. So the PMI comes out in January. I look at this thing from a demand and output and an input standpoint. I take all 10 of the sub indexes and group 'em into one of those three. Let's start with demand. Demand includes new orders, obviously it includes new export orders, it includes customer inventory. That's the amount of inventory that our panelists think their customers have of their product and it includes backlog. So demand with a seasonal adjustment factor for January, which is not unusual, but this year it was a little bit stronger.

We blew by 50, I think we came in at 52 and some change on demand. We hadn't seen that kind of number in 14, 15 months. So that's really important and all of a sudden demand is back. Now, some of the things that helped that, the tailwinds are that everybody's been kind of waiting for prices to continue to come down, lead times to get back to historical levels. They've never come back to historical levels. Lead times are still elevated and prices are probably not going to budge. So you get to the end of the year, 2023 was a cashflow metric. Get people bled the inventory pipeline dry so that they made sure they met their cashflow numbers. So now it's time to kind of re-up. That means customers, panelists. So a result of that is we had a significant amount of new orders come in earlier than what I had predicted, and not totally out of the blue, but a big surprise.

But okay, good February, we're going to have some headwinds because the seasonal factor won't be as supportive. So we're going to have to offset that to maintain a 52 53 rate in February. We'll see. But I think by the time we get to March, that number's going to be comfortably over 50 on a going forward basis. New export orders getting grimmer and grimmer. Surprisingly and disappointingly right now, the panelists are saying we're not going to really see any life out of Europe or China until the second half of the year. Okay, fine. Customer inventory supported the new order number. It came in at the high end of way too low or at the low end of too low, whatever you want to call it. The customers are really saying, I don't have enough of your products ship it. To me. That fits in very well with the story about more new orders because if customers don't have the inventory, they're going to place more orders.

It fits really well. That's why I think that although there's going to be headwinds in February, we're still going to see momentum on the new order number that we bled everything so dry in 2023. There's not much of a choice but to re-up and I think as liquidity becomes, there's 12 months of measurement basis, many times four quarters of measurement basis. You're in the first quarter, first month, first quarter of those measurement points you can afford to invest. And that's what people are doing because customers are upset that they don't have the lead times that they enjoyed before the pandemic. And there's no doubt we can get there, but you can always get a little bit of help with more inventory and I think that's what's happening here. We got panelists and panelists, customers saying, okay, time to invest in some inventory. I got the cash for it, let's go.

We got the whole year to live through. We think it's going to be better in the second half. This is essentially a short-term investment. It's not a long-term investment, no problem. So new orders are good. It goes right into the PMI. New export orders were bad. Does not go into the PMI. That's one of the five that does not go in customer inventory way too low. Really good for the future backlog, still contracting at pretty much the same rate as December. I'm not worried about it now because backlog is not so much a leading indicator. It's more of a lagging indicator. Backlog will grow as production cannot meet the new order rate. New order rate increases, backlog's going to grow because production can't output. So I'm not concerned about that. I'm more concerned about backlog as we come down the growth curve. I'm not as concerned about backlog as we go back up the growth curve.

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Okay, so demands looking really good the first time. It's looked good in 14, 15 months. Honestly, I'm optimistic. I still think we're going to see a PMI over 50 in March, but you never know. February might bring another surprise on the output side. Output is production and employment and it did what I had hoped it would do. Production was flat to December, which was flat to November. Now production was almost like a surrogate for billings. As long as you're not taking that production and shoving in revenue. I mean in the inventory this first quarter, the production may exceed billings because we've already said that we're probably going to restock the inventory, Ben. So it is maybe not as accurate in February, March and April, probably March and April more than January, but I think January we didn't really feed in our own semi-finished products and finish goods into inventory.

So I think that's showing signs of life we're now, I mean the inventory enterprise inventory number generally runs 48 to 52. We've been in the low to mid forties for a long time, and so we're breaking lots of new ground here. So it's now time to get that number back up. In the high forties, I think we came in at 46 or 46 and a half. I'm expecting probably by February, March we're probably going to get the 49, maybe 51. And that's going to help the PMI index because that number does go into the index calculation. And then the last one is I don't want to miss out on, lemme come back to employment because that's probably the biggest story, but on the input side, one of the other ones that goes into the index, that supplier deliveries, so the higher that number is on supplier deliveries, the slower suppliers are delivered.

They've been delivering, I mean the higher the number, the slower, so the lower the number, the faster. So they've been delivering fast for a long time where now we got very close to the 50 point, which means they're delivering slower. So the month of January was a stiffening of delivery velocity, which indicates that suppliers are now getting a lot of orders. They've de-staffed somewhat, they don't have a ton of inventory, therefore they're struggling with meeting on time delivery commitments. And that's actually a good thing because it shows strain on the manufacturing economy. So let me jump back to output. The output, like I said, it includes production and it includes employment. Employment is continuing to come down since May of last year. Our panelists pretty much reported that for everybody who was positive, there was one person who for every one positive person, there's one person who's not so positive that's been going on for four or five months and it's led to de-staffing.

Now like I said, when we asked the question in December about employment levels, our panel came back and said we de-staffed over 2% in the last six months of 2023. Done very stealthily, not very, you saw a couple of companies with 5,000, 10,000 people, but a 2% reduction in manufacturing headcount is a big reduction. So it happened, it happened throughout the year. It happened very methodically to match what the panelists predicted would be the going forward demand based on burning off all the backlog and what they considered to be stable demand going into 2024. So that's kind of happened here. We continue to de-staff. There's still in January we're still using layoffs and attrition to get the headcount down. It's not a lot of pain. There's those people are leaving and going on to other jobs as you can see by the JOLTS numbers and the jobs reports.

But that really means that that matches the fact that our panelists have said that they're going to be more profitable in 2024 than they were in 2023. The only way you can do that if you're looking at increased wages and benefits, which we said will be about 5% in 2024, increased material prices, which we said would be about 3.1, 3.2% by May, and then stay that level through the end of the year, how do you then increase your profit? Well, you got to get more productive for sure. You got to get more productive and you've got to get some better absorption, which means volume. So that's the PMI for January, A positive surprise demand appears to be coming back. If it can be validated, I validated it by two data points, customer inventory as well as new orders. If we could maintain that level in February, we're probably on a good runway to grow back out of this trough and get back into an expansion zone of 51 to 54.

I do not see us in the next 12 months getting into the high fifties. I don't know what would do that. There have to be some major stimulus. We're in a restricted monetary policy still the good thing is that Powell has said, I'm not going to raise rates. So that gives us a lot of assurance that we're not going to get clobbered on our own interest expense and that our customers are going to be much more willing to invest because they know they're at the top end of what's going to cost 'em for money. And then the reduction in rates will just be another tail one that'll help us out. But I think 2024 is shaping up into a good year.

Rob Cox: Excellent. Thank you very much for that, Tim. It sounds like there's a lot to be cautiously optimistic about, so thank you for that. You mentioned some of the surprises that came out of the PMI report. Are there any other surprises that maybe you didn't mention that you think were most surprising from this recent report?

Tim Fiore: Yeah, I think the fact that we're still de-staffing more than adding headcount. Now we're at a 1-to-1.2 higher fire ratio I call it. So for every one person commenting about hiring, there's 1.2 commenting about letting people go. I'm a little disappointed that we're still doing that in January and February. We had plenty of notice I think to go ahead and do it. Although the companies that may be delayed might be in the better position. If they can transition the next three or four months at lower than 20, 24 annual output rates and maintain those people without losing too much money, then they don't have to worry about people either. But I also think that this is a period where, well, for those of your listeners who have been in business for quite some time, you know that when you hire a hundred people, there's only 80 that you want to keep.

In the end, there's 20 that you need to find another home for and you're either in a new job or some other job. And I think there's a bit of that going on too, because for the last two and a half, three years, nobody let anybody go. They begged people who could breathe to show up on the factory floor, let alone know what they were doing. So there's a bit of that cleanup going on now too. There's good cover to do that given that demand has been off and that people have been digging into backlog. And I think everybody pretty much feels that you're not going to see some dramatic recovery here in demand because as I've been saying for a while now, there's a lot of benefits to a soft landing and I, I'm almost calling it like a touch and go. It's not really a landing, it's a, we're hovering over the runway, we touch the wheels and now we're going to take off.

It's not going to be a fighter jet takeoff with a lot of straight up. It's going to be a big C-5, a cargo plane slowly going up. There's no other reason for it. I don't see a huge amount of stimulus coming in in 2024. The next president might bring more stimulus. Unfortunately we're fighting all that stimulus that was brought in in 2021. I think it was 2021 in March after the last election. That did not help anything. That absolutely fueled up inflation and it really contributed to what had happened compounded by then the Ukraine issue that impacted the energy markets. But outside of that, I don't know that that would be really responsible. I don't see the fed getting fully accommodative. I think they're very comfortable getting back into a neutral space plus or minus a marginal percent so that they can operate. They're actually coming out and saying, Hey, we need to get back to a 3-to-4% rate.

So we've got ammo in our belt facing any other issues in the future running at a zero interest rate. All they could do is buy bonds and that's only part of their playbook. They really need to be managing interest rates. So they're going to settle in at 3-to-4% because that's going to be considered a neutral spot. But I don't see anything outside of a huge stimulus. We've already done the infrastructure so there can't be another infrastructure bill. So I don't know, that's the only thing I can see that would really juice demand, but that would not be a good thing because it'll just overheat us. And then so my point was there's good things to a soft landing, IEA touch and go. There's good things to a hard landing too. People don't like to talk about the good things. The good things to a hard landing is when you've hit the bottom because you feel it, you get hit in the head with a sledgehammer, you feel it, you've got to de-staff people, prices have to come down, everybody knows it.

You got to lay off, you got to cut prices to maintain share, you got to let people go. You know it in a soft landing, you don't really know it, so you're always going to err on the positive side. You don't want to overreact, but you tend to really underreact and I think we've done a lot of that. So in the case of the PMI, I wasn't really sure that we were in a trough until a couple, two, three months in. I think I finally called it in September and the trough, we actually hit the trough I think in August or July because I didn't know. And then after two or three months of pretty much the same PMI at to 47, it's like, yeah, I think we're in the trough here. I think this is it. I don't see us going any lower. Don't know why we would go any lower.

The big question is when are we going to climb out this? I don't know. We're going to sit here for a while and see these are the problems with soft landings. So then when Chairman Powell says, even without the fed saying we're going to cap on interest rates, our panelists had come in and said 2024 is going to be better than 2023. They felt it anyway. They felt okay, we're getting close to real demand now and we've got replacement demand and things that people haven't been able to replace, stuff that wore out that's going to continue to show up in our order books. I think when the fed finally said, Hey, we're at the top, that was the indication that we're at the trough. We can only go up from here. And I think that's kind of what 2024 looks like.

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Rob Cox: Excellent. Thank you very much for that Tim. Let's shift over to the international supply chain. Now you talked about exports and we're seeing strong domestic numbers, but poor export output. What does this mean for businesses that are relying on the international supply chains? How should they approach the next few months and how might these numbers inform shifts in their strategies and what do you see as their current biggest risk to their international supply chains?

Tim Fiore: Yeah, so the good thing is that this is nothing new. We've been dealing with this now for two and a half years. I mean, there's actually two elements. When China shut itself down, not only did we deal with a supply input shock that we couldn't get the products that we wanted leading to massive backlogs at the docks. We also had a demand shutdown where about 15-to-18% of U.S. manufacturing GDP gets exported. So it's not a small amount. If it's stable, it's fine. You can plan for it. It's not 25%, you don't have to live by it, but if it's unstable, it becomes something that you have to manage. And for sure we've had that issue, but we've been able to manage through it. So we're now entering a growth spurt in spite of the fact that the export markets are pretty much asleep and we've been going up and down for the last four or five months with the panelists on, is China better or is it worse?

Is Europe better or is it worse? And the funny thing is China's a pretty rapid economy. It can turn on a nickel and move quickly. Europe is not a rapid economy by design. Everything in Europe is designed to slow everything down so that nobody overreacts. There's good to that, there's not so good to that. The good is it's not going to fall off the cliff tomorrow. It's going to maintain where it's at, and that's kind of where we're at. It's not alive, it's not really growing. I think the growth profile is probably less than 1%. You don't really feel it. Okay, fine. China's a bit of a different story because you've got the geopolitical risk going on too. The whole onshoring reshoring tariff issue, counter tariffs that the U.S. doesn't talk about. There's a lot of stuff going on in the semiconductor chain that was probably driven by China, responding to us shutting off the semiconductor manufacturing equipment.

A lot of stuff that we need in our everyday lives. A lot of those automotive chips and stuff are probably China based, and the world in China is still very opaque. You're not really sure what you're dealing with at any given point in time unless you're there all the time. So I don't think the either market's going to help us much. I think the big challenge over the next three years doesn't matter who gets elected is where are we headed with China? I mean, if you're standing here, having done a lot of work in China myself several times and how difficult that is, and I've been into China since 1993, this is not going to get fixed in the near term. I just don't, there's ideological distance that that gap is not going to close quickly. And I think you saw that with a Trump plan that I think finally somebody called it for what it was, which nobody ever really wanted to because corporate emeritus felt so good about China and the benefit and the American consumer felt so good about China, Walmart, Target, the stuff that we buy in those places should have been probably twice as much as what we're paying today if it had been domestically made.

But the reason American public has been able to live with 2% or less wage increases is because pricing on a lot of the stuff that we consume every day was China-based and cheap. So President Trump stepped up and said, Hey, there's more here that meets the eye. I'm not putting up with it. The tariffs I think were, we ended up paying for those things. There may have been some sharing on the China side, the intellectual property was real, and the fact that they're using our tech to improve their own situation is not a big surprise. And then Joe Biden comes in and doesn't change any, that kind of says everything right there to everybody that America sees China as a potential, as a rival on the international state it is, and that's not going away. There's no next election in China, and so we're going to be dealing with this thing for quite some time.

So export markets. The export markets have a big impact on the services side. A lot more of the service economy is exported than the manufacturing economy, but I'm not as concerned. So since all this broke out, there's a lot of reshoring, onshoring. I'm concerned that we're going to have a short memory and a lot of that's going to fall away because you reshore onshore, it's going to cost you more with a nominal shipping cost, meaning a normal shipping cost, let's call it 3,000, 4,000 bucks a container out of China. If you're not paying 10,000 a container, 3000 a container is not a huge amount, and who's going to pay the extra cost to onshore in the U.S. or even in Mexico? That's a big question. I think there's a lot of people moving away from it because it's convenient to move away from it today.

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Rob Cox: Excellent. Well thank you for that. Tim, I have to ask you about inflation. Inflation's a stubborn issue. What did you take away from the 7.7% higher prices index? Do you think it's the start of a new trend?

Tim Fiore: No. Okay, so remember we measure month-to-month. So that's seven points. It's not 7%, it's probably more than 7%. It's a seven point climb. So broadly speaking, in December we saw price reductions and in the analysis that we did, we pretty much said that the energy markets are offsetting the price growth in the commodity markets, other commodities, the hard commodities, the steel, aluminum, the copper. We saw price growth occurring again in the third quarter, end of the third quarter last year, fourth quarter for sure. We saw a stabilization of prices. Once we saw the spike with Ukraine, we saw prices start to come down. They pretty much stabilized. We're running at a thousand dollars a ton for short, for hot row coil, a short ton, that's a lot. And the historical price for that, if you adjust for a nominal inflation of 2% should be somewhere around 700 bucks.

We're still paying a thousand and that's probably not going to budge much. It seems to be on the move now slowly, but it's not going to get down to 700. So my feeling is without the hard landing, we didn't get down to historical lows. On the pure commodity markets, there's three different types of costs in the manufacturing world. There's pure commodity, there's partial commodity and there's high labor content. The pure commodity market could adjust back to 2019 levels because that's driven by demand. And if demand falls off hard landing, I could see us back at 500 bucks a short time, but we didn't have a hard landing. So why are steel companies going to to do that in the meantime? They're probably pulling capacity out to maintain pricing structures if the volumes are down, it's not a huge amount of capacity coming out, but capacity nonetheless, and that's also keeping our lead times up.

So as comes out, lead times are not dropping. So I think that we saw that in December. In January we saw less of that. We saw less of the energy markets offsetting the commodity markets. So you saw the number get back above 50, I think 52. Was it 52 53 prices index, again, not huge, 60, I'd be worried about it, but my analysis on this, and I was out in media after the release and I made the statement that the single biggest issue for manufacturing in 2024 is the resurgence of price inflation. I can't really tell whether we really beat it and as demand comes back, it's only going to fuel it, and if it gets fueled enough, the fed's going to have to do something. And that to me is a risk. Right now we're sitting here saying the Fed's not going to increase rates. Well, if we had a price index that continued to go up, it hit 60 and stayed at 60 for three or four months.

If you had the JOLTS report indicating that wages are growing too fast and employment levels are way too good, the Fed might just jump in and say, I said out, we're at the top, but we're not inflation's back. So I think the biggest issue for 2024 is a resurgence of an unacceptably high inflation rate. And Chairman Powell, he laid the groundwork that says, Hey, we're going to have ups and downs. I like the fact he made the statement that, hey, sometimes we have essentially a rogue metric that we can't fully explain. I know exactly how that feels. I see that now and that, but I think the biggest issue in 2024 is we could see inflation come back, which could cause the Fed to react, and if they react, it's going to impact the whole demand profile. And this time they might even throw us into a hard recession rather than a soft land. I don't know that they'd want to fumble twice.

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Tim Fiore: The other thing on inflation rates is that the other thing I liked about Chairman Powell, he said not only did he say we're at the top of the inflation rate hikes, we don't expect to get back to 2% over time until 26. So that's the first time I actually saw that number. I may have missed it, but what he's saying is, Hey, I don't need to get back to 2% next quarter or the second half. I need to get back to 2% in about two years, which gives you a lot of runway and it gets him out of the political cycle here too. Now if things run okay, he's now not an issue in the election, and I think that's really important.

Rob Cox: Excellent. Thank you for that. Tim, you've been very generous with your time. May I ask you two more questions?

Tim Fiore: Sure, go ahead.

Rob Cox: Excellent. What do you want our listeners to take away from this month's report? How should they expect manufacturing to fare over the next few months and what major factors out there could have a significant impact?

Tim Fiore: Okay. I think your listeners should be positive about 2024. I think they should really look at this thing from, there will not be a recession. I don't see it, haven't seen it in a while. I think they should also realize there's going to be a slow grow out because we didn't have a hard landing. So you're not going to see great guns, 10% growth, you're going to see a slow, I mean I could see us getting back to a 1.7, 1.9 GDP. If you remove fluctuations and imports, unusual fluctuations in imports that impact the number. If you remove unusual activities in inventory, which you might not be able to do for the first half because I think there's going to be a bit of a rebuild in inventory here. I don't think there's going to be an overinvestment inventory, but there will be a rebuild in inventory and that disconnects the GDP number from the true consumption number.

Inventory is a way to jump GDP up when maybe people aren't really feeling it could be sitting in somebody's storehouse, but I think people should be positive about 2024. They should feel that second half is going to be better than the first half. They should probably go ahead and continue de-staffing up through March and I think it'll be clearer by the time we hit March, how sustainable at what rate the demand will be. I think they should not worry so much about backlog anymore. We're not going out of business. We're not going to go into a hard recession. Your listeners should go in and make the investments. They should make the investments to replace capital that they weren't able to replace over the last two to three years, get that production capacity up and I think invest in productivity improvements because you get headwinds on wages and benefits.

Our panelists predict a 5% growth in wages and benefits in 2024. That's a huge amount. That's big and that's baked in. That's not subject to somebody's decisions. It's baked in unless there's a hard recession. There's a hard recession where the Fed steps in and jumps rates two points. Those wages and benefits are what they are for all of 2024. And I think we're still seeing pricing grow. I don't know that it's going to be dramatic, but so somehow to improve your profitability, which everybody needs to do, you got to make up for it in productivity gains and volume. But I think the field should be clear. Go do it. I don't think there's any huge unknown out there. The huge unknown at this point is the rate of expansion. It's not whether there will be one.

 

Rob Cox: Excellent. Thank you for that, Tim. And my final question for you, since RED BEAR has a large procurement audience, specifically for procurement, what's your advice for procurement professionals negotiating with suppliers now and how might that advice change in the coming months, even into the second half of this year?

Tim Fiore: Yeah, so it's not just for procurement professionals, it's for the business professionals, but that's what procurement professionals are. One, it's for decision-makers, material managers, general managers, guys running and women running factories. What should you do? Jump in. I don't think, don't be timid. There's plenty of time here. Don't over-commit. I think you should clean up the staff that you don't really need or don't really need slash want anymore. Do what you got to do and improve the quality of your labor content in the first six months of the year. Growth is not going to be dramatic as I mentioned, but we're going to grow nonetheless.

If I had supply people coming to me saying they want a 10% price increase and they're still sitting with a 30% longer lead time than what we want, I said, okay, go ahead, cut the deal, but only cut it for three-to-six months and then revisit it at that point in time. If you can't get anywhere near what you think you need to get through the year, then do a short-term deal. Because I think three months from now we're going to have more information on this for sure. By the time we hit May, it's going to be a lot clearer about where we're headed and you start compounding interest rate cuts and the euphoria around that. Who knows what kind of demand that will bring. And then Europe will wake back up and it will have a draw. And I'm not sure about China. China's going to have to purchase from us. They only purchase from us stuff that they have to. So that's going to come back to it's not, but it's not going to.

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Rob Cox: Excellent. Tim, you've been very generous with your time. Thank you so much for being on today's podcast. Is there anything else you'd like to say to our listeners before I let you go?

Tim Fiore: No. I think we've had six expansion cycles in the 20 years I've been watching this. I've been watching for 20 years, but I keep track of the last 20 years, six expansion cycles of which two of those turn into recessions. The Manufacturing PMI tends to lead everything and it's highly cyclic. So we're early and we move enough where you can see the difference. So I'm an advocate for it. I've been living it now for I'm in my seventh year. I really feel that it does provide that leading indicator information that market watchers need. There's only a couple of things that do that. Consumer competence slash sentiment is another one, although that is transitory and it's today and it's how people feel. Really the JOLTS report and the jobs report are important, but I think what's happened is the dynamics have gotten so messed up that maybe they're not really reflecting everything.

In other words, if I was still working a whatever manufacturer, if three months ago I wanted 10 people, I put 10 recs in two months later, I only want five. I don't know that I'd be canceling the other five yet. I'd let them out there. I wouldn't make any offers for 10 for sure. I'd make the offers for five, but I wouldn't cancel all of my 10 put-ons. A lot of that has happened over the last couple of years in some of these jobs reports. That's why you have two-and-a-half and three times the openings compared to the people who are looking for work. Because companies have not canceled those outstanding recs. They haven't come to a data reckoning. Now I think you tend to clean that stuff out on a quarterly or an annual basis. I think the numbers will probably be better here in Q1, which is good.

But my point is I think the other numbers have had some issues. We had some issues during the pandemic. The fact that it fell off so fast and it came back so fast, even with a monthly measurement, we couldn't pick it up. There was stuff happening in the fourth week of the month that was foundational, and I am reporting the prior three weeks of the month, which was totally different than what was happening that day. But that was very unusual. I think we've been very consistent. As long as you didn't have these huge Vs. We've been very consistent, much more than the other early indicators. So I'm an advocate for the Manufacturing PMI. PMI is fantastic. There's only one. It's the one that's put out by the ISM. We've been doing it since 1934. And in 1948 we converted it to numbers and the fact we've got history that goes all the way back to 48 and during the pandemic, we were breaking 1948 records, interestingly enough on the rise and the fall in terms of rate of change per month.

But hey, it's a good time to be in business. Think the worst is behind us as long as inflation doesn't rear its ugly head, as long as the federal government doesn't come along with fiscal policy and throw all this juice in that we don't need. We're finally dealing with what happened the last time that happened. And it seems to me to be kind of behind it. We still got the debt that we got to work through, but I'm not that worried about the debt dollars. Still strong. I think we're in a good position here. Watch the first six months. Second six months should be better than the first six months will be better than the last six months. And I think that's the summary of it all.

Rob Cox: Excellent. Tim, thank you again so much for your time. Be sure to check out the ISM Manufacturing PMI report every month. This has been the Confident Negotiator Podcast. We'll see you next time.

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