(RPT)MNI INTERVIEW: ISM Chief Sees Clear Price Stability Trend

(Repeats story first published on Sept 1)

U.S. manufacturing growth appears to be on a moderate glide path with price gains heading toward stability and employers finding it easier to keep workers, Institute for Supply Management chair Timothy Fiore told MNI Thursday.

The August measure of materials prices fell another 7.5pps after plunging 18.5pps in July to the lowest reading since June 2020. Over the past five months, the index has dived 34.6pps.

Almost 27% of those surveyed paid lower prices in August, up from 6% in May, while the number of firms reporting higher prices dropped 10pps to 32%, the report said.

"There's clearly a trend towards getting to price stability," Fiore said in an interview. "We're levelling off through the end of the year," he added, not dismissing the chance the price index could dip under 50 in coming months. "We're not out of equilibrium if prices dropped down to 45 and up."

EXCESS INVENTORY CONCERN

The ISM manufacturing composite gauge was flat in August at 52.8, beating market expectations for a decline and boosting chances for another 75bp Federal Reserve interest-rate hike this month. (See: MNI INTERVIEW: Fed Likely To Hike Another 75BPs In Sept - Haslag)

While the lowest ISM reading since June 2020, Fiore maintained his view U.S. manufacturing will see steady growth through the end of the year and added the sub-indexes are "changing for the good."

But manufacturing concerns around inventories are also heightening, he said. "As lead times were pushed out, buyers had to jump into the market and now they're trying to make sure that as they close the year they don't get stuck with excess inventory," Fiore said. "That could mean prices will drop at some point but I don't think it's in the next two to three months."

The inventories index grew at a slower rate in August and the new orders index increased to 51.3 from two straight months under 50, as firms judge paring back their order flows, Fiore said. Supplier delivery performance recorded its fourth straight month of improvement.

SLOWER QUIT RATE

The August report also showed employment jumping 4.3pps to 54.2 after three straight months of contraction. "Employment gains in August should translate into stronger expansion in production growth in September,” Fiore said.

"We made gains simply because the quits rate slowed down because some are getting a little concerned about the economy," he said. The ratio of hiring to firing has also been stable for several months, he said.

A larger share of comments noted greater hiring ease, and among respondents whose companies are hiring, 18% expressed difficulty in filling positions, down from 35% in July.