In the first of this week’s marquee data in the US, ISM manufacturing handily topped expectations.
The gauge printed 60.8 for February, well ahead of consensus, which was looking for 58.9.
The range was 57 to 61.5. ISM now sits at the highest in three years.
This sends another positive growth signal to markets, and further underscores resiliency in manufacturing.
Market participants were keen to see if the survey revealed additional price pressures. And it did. Prices paid hit 86. That’s the highest since July 2008.
Pretty much everything looked hot. Encouragingly, the employment gauge rose to 54.4, so there are some actual people benefiting as the economy attempts to resolve the pandemic distortions which are, in part anyway, responsible for these blistering survey prints.
“Members reported that their companies and suppliers continue to operate in reconfigured factories. Issues with absenteeism, short-term shutdowns to sanitize facilities, and difficulties in hiring workers remain challenges and continue to cause strains that limit manufacturing-growth potential,” ISM’s Timothy Fiore said Monday, adding that “optimistic panel sentiment increased, with five positive comments for every cautious comment, compared to a 3-to-1 ratio in January.”
The survey flagged “continued supplier pricing power and scarcity of supply chain goods.”
In the sample of responses, mentions of higher prices were ubiquitous, e.g., “Prices increasing,” “Steel prices have increased significantly,” “Prices are going up, and lead times are growing longer by the day,” “Prices are rising so rapidly that many are wondering if [the situation] is sustainable.”
That latter quote is from someone in “wood products.” The chart (below) speaks for itself.
Meanwhile, the final read on IHS Markit’s manufacturing gauge for the US was down marginally from the flash print. But the same commentary on prices was prominent in the accompanying color.
“A concern is that shortages of raw materials have become a growing problem, with record supply chain delays reported in February, contributing to the steepest rise in material costs seen over the past decade,” IHS Markit’s Chris Williamson said.
“Prices charged for a wide variety of goods coming out of factories are consequently rising, which will likely feed through to higher consumer inflation,” he added.