Everyone is Shopping, But Not All Are Buying

A friend of mine visited an upscale suburban mall over the weekend and found the parking lot full and the shoppers lively. The only things missing were lots of  bags crammed with merchandise coming out of the stores. In other words, people were having a lot of fun looking, but appeared to be careful about their buying. Based on the latest ISM Manufacturing Report on Business and other indicators — that observation might be a good analogy for the global business climate.
For instance, the ISM ROB for September went positive again — after three months in negative territory. The manufacturing PMI went up to 51.5 — an increase of 1.9 percentage points over the last month.  The Non-Manufacturing PMI jumped 1.4 percentage points to 55.1 (Here’s the link to find both reports
ISM ROB.)
From our perspective — that’s a sign that the “shoppers” are out again, but just because they are looking doesn’t mean they all will be buying. There’s still far too much uncertainty for many companies to make firm plans. They are waiting for election returns and Congressional action on the “fiscal cliff” — not to mention a European recession and Chinese economic slowdown.
Consumers uncertain about the economy are saving more than spending, and companies are following a similar course — hoarding cash by meeting slowly growing demand with minimum new investments.
This period of uncertainty and incremental changes up or down may last through the end of the year — or longer. If so, it would be a good time to push through the programs that sometimes get set aside during rapid growth — visiting suppliers, mapping your supply chain deeper than the first tier or two to assess risk, reviewing sustainability or establishing better documentation of the chain of custody. All these things will put you on firmer footing regardless of which way the economy turns.

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