ISM Commodity in Negative Territory For Fourth Straight Month

Each month in the ISM Manufacturing report, survey respondents are asked which commodities they have seen rising and falling in price.  This survey provides a good guide regarding pricing pressures in the pipeline.  When manufacturers see several commodity prices rising in price, it usually precedes a pick-up in inflation and vice versa when the number of commodities falling in price starts to rise.

In this month's survey, respondents saw price increases for eight commodities and price declines for nine, for a net of minus one.  The chart below shows the three month average net monthly reading of the ISM commodities survey.  As shown, the current negative reading is only the fourth time since 1999 that this indicator has dipped into negative territory.  In two of the three prior periods, the economy was in a recession, while the economy managed to skirt a recession when the indicator went negative in late 2006.  Fortunately, at this point the current dip into negative territory looks more like that period than the two periods when we went into a recession.

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