Yesterday, the stock market took an ugly hit. The Dow Jones Industrial Average dropped by the biggest amount since the financial meltdown three years ago. This drop followed smaller drops in prior days that were at least partially influenced by lower-than-previous-month numbers in ISM’s economic indexes.
Earlier this week, the Next Level Purchasing Association released our August edition of Leading-Edge Supply Management magazine. Each month, we include graphs of the overall Producer Price Index, overall Consumer Price Index, and a reader-selected index to share with procurement professionals the trajectory of pricing. This is what this month’s graphs looked like:
As you can see, after months of steady price increases, there was a sudden turn that began in June. While procurement professionals were frustrated this past Winter and Spring with upward price pressures, the easing of those pressures occurs contemporaneously with concerns about the strength of the economy.
So, is what’s good for procurement (declining prices) bad for the economy (economic instability and investment market panic)? If so, you have to be careful what you wish for.
The one bit of good news today is that the unemployment rate dropped back to 9.1% in July after rising to a six-month high of 9.2% in June. Another interesting thing will be how the Gross Domestic Product changed from the 2nd quarter of 2011 to the third quarter (which we’re close to being half way through). Looking at the graph below, third quarter GDP will either continue an upward trajectory, meaning that we’re in the second phase of a “W” shaped recovery or will go downward, making the second quarter an anomaly in a declining trend that has us headed for another recession (already?).
To Your Career,
Charles Dominick, SPSM, SPSM2
President & Chief Procurement Officer
Next Level Purchasing, Inc.
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