Caterpillar

In terms of the state of manufacturing in a downturn, Caterpillar (CAT) had a striking quote in their last earnings call.

And generally speaking, if you go back to the '80s, close to half the world's manufacturers didn't make it through that downturn successfully. And the strongest got stronger, and we were one of those. I would expect that we will strengthen our position going through this downturn.”

The state of the ISM

The ISM's PMI hit some nasty lows in the 80's downturn, which were recently hit again in January during the current downturn, before seeing a rebound to the recent level of 42.8%, which still implies contraction, just less than before. Now, is the above Caterpillar quote correct, was it really almost half of manufacturers that ran into serious trouble? It would seem that this time around, things haven't been so bad. But feel free to enlighten me.

Interesting inflection point for New Orders

Most recently, if we look at the latest ISM report released June 1st, we see that there has been an interesting inflection point. New Orders growth went positive, continuing its improvement since December 2008, but rather shrinking by smaller amounts, it is now growing. Customer inventories have also continued a 2-month drop, which is a positive for future manufacturing orders.