The ISM Reports on Business

2 Norbert Ore, C.P.M., CPSM Chair, Business Survey Committee Institute for Supply Management “Adding Uncertainty to an Environment of Uncertainty” Capitalism is the Worst System − Except for All of the Rest

The financial system is broken. Banks aren’t lending. Housing supply exceeds housing demand. The Federal Reserve has no tools left. Consumers are tapped out. The unemployment rate is soaring. How are things in the Economy??

It has happened before!!??

5 Composition of GDP Government spending - 19% Capital Spending -16% Consumer Spending -70% Other - 5%

6 Composition of Consumer Spending (PCE*) * Personal Consumption Expenditures

7 The Reports on Business A series of diffusion indexes measuring change from month to month Above 50% indicates growth Below 50% indicates contraction 50% is the breakeven or “no change”

8 Economics and Calculus The Rate of UP is DOWN 50 % The Rate of DOWN is UP 50 %

2009 Avg

12 http. The ISM Report on Business®

13 Manufacturing Index Weight New Orders.20 Production.20 Employment.20 Supplier Deliveries.20 Inventories.20 Non-Manufacturing Index Weight New Orders.25 Business Activity.25 Employment.25 Supplier Deliveries.25 ISM Composite Indexes

14

15

16

17

Manufacturing Payrolls

19

20

21

24

25

26 Manufacturing Growth Industries in recession Petroleum and Coal Products Electrical Equipment, Components Chemicals Primary Metals Machinery Paper Products Computer and Electronic Products Food, Beverage Transportation Equipment Plastic and Rubber Products Fabricated Metal Products Industries in depression Nonmetallic Mineral Products Printing Textiles Wood Products Furniture Miscellaneous Mfg Apparel

It has happened before!!??

stock market crash S&L crisis (1980s-1990s) Rapid decline of oil prices in the 1980s (think Texas) Asian Contagion Long-Term-Capital Management September 11, 2001 Enron downfall – 2002 credit crisis Rapid rise of oil prices in the 2000s Hurricanes Katrina and Rita – 2005 Hurricane Ike – 2008 Since 1982, the US economy has been in recession just 5.2% of the time, versus 31% of the time between 1969 and “The Panic and Recession of 2008” will result in a lengthier than normal recession with the low point being Q42008-Q Rapid decline of oil prices in 2008 (think Texas) Economics Events ………

Spending Money Spend your money on yourself Seek greatest value Careful, Maximize Personal items Somebody else’s money on you Careful Not the cheapest Expense Account Lunch Spend your money on somebody else Careful, considered Devote less detail Gift Somebody else’s money on somebody else Distributor of welfare Generosity School system Reference: Milton Friedman