PMI 61.2, which is of course positive.
Now look at Prices Paid: 85 .vs. 82, ridiculously elevated and with absolutely no sign of letting up.
Inventories are also below normal which implies that customers (retailers) are attempting to avoid stock up on something they think is going to possibly come down in price. Production certainly doesn’t support the idea that inventories can’t be built, and new orders are down from last month as well. In addition supplier deliveries are up and order backlog is down.
This is “shy away” behavior folks. Beware the headlines and look inside the report.
The squeeze is here on margins and it’s going to hurt. I expect attempts to pass through these costs to begin shortly, and when that gets going the so-called “inflation expectations” number is going to be shot to hell, placing The Fed in an untenable position. The “FSA” open-spigot federal spending game has been covering up a now-compounded 30% decline in GDP and when that spigot is dialed back, even a bit, you’ll see recognition of what has really happened with a vengeance.
The game played in 2007 and early 2008 was perhaps defensible. Continuing it to the point we have, such that we now have more than three full years of this policy under our belt, was not only indefensible it has built into the system distortions that cannot have their impact avoided.
Of course “nobody could have seen it coming” will once again be the most-common statement on Tout TV.
Not only could it be seen coming, given the data this outcome is inevitable.
Sit back and enjoy the music folks…. really, it’s all good.