Inflation "Warning Lights" Are Flashing As Manufacturing Prices Soar Most Since 2011

  • Written by Zero Hedge
  • Published in Economics

Despite a tumble in 'hard' and 'soft' data in April, Markit reports the Manufacturing PMI survey surged to 56.5 (as expected) - its highest since Sept 2014. Output is rising at its fastest pace since Jan 2017 as inflationary pressures intensify dramatically.

As is usual recently in our baffle 'em with bullshit world, ISM Manufacturing disappointed, dropping to 57.3 (exp 58.5) to its lowest since July 2017.

Looks like ISM is fitting real data better than PMI...

ISM saw a big drop in employment, modest drop in new orders, but big jump higher in Prices Paid...

But there was a major divergence between adjusted and unadjusted new orders...

One ISM respondent summed things up well...

"[The] 232 and 301 tariffs are very concerning. Business planning is at a standstill until they are resolved. Significant amount of manpower [on planning and the like] being expended on these issues.

Commenting on the final PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

“April saw US manufacturers reporting the strongest monthly improvement in business conditions since September 2014. The survey suggests the economy has started the second quarter on a solid footing and sends an encouraging signal for GDP growth to accelerate after the modest 2.3% rate of expansion seen in the first quarter.

“With inflows of new orders rising at an accelerated pace, greater input buying and business expectations regarding future production levels running at one of the highest levels seen over the past three years, there’s plenty of evidence to suggest strong growth will persist through May.

“The upturn is being led by large firms, with smaller companies trailing behind but nonetheless also seeing some of the best business conditions for three years.

However, Williamson leaves the best/worst for last as inflationary pressures are intensifying dramatically...

Warning lights are being flashed in relation to inflation, however, with factories reporting the strongest rise in prices for nearly seven years. Suppliers are hiking prices in response to surging demand, while tariffs and higher oil prices are also exerting upward pressure on costs.

With the average price of goods leaving factories rising at the fastest rate since 2011, consumer price inflation looks set to accelerate.

And ISM data shows the soaring Prices Paid index (to its highest since April 2011) diverging from new orders and employment...

That did not end well last time....

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