If you were looking for a scorching indicator to support the contention that the US economy may be well on the way to running hot later this year, the Philly Fed sufficed on Thursday.
At 51.8, the headline gauge for March was the highest since 1973 (figure below).
Consensus was looking for just 23.3 and no economist (out of more than three-dozen surveyed) predicted anything like what you see in the visual.
“Nearly 59% of the firms reported increases in current activity this month (up from 35% last month), while only 7% reported decreases (down from 11%),” the accompanying color read.
New orders likewise hit a half-century high (figure below).
“Firms continued to add to their payrolls this month,” the report said. “Nearly 32% of the responding firms reported increases in employment, while only 1% of the firms reported decreases.” That’s good news.
Of course, what markets are really interested in right now are price pressures, and the Philly Fed didn’t disappoint. The prices paid gauge soared to 75.9. If you’re wondering, that’s the highest since 1980.
“Over 77% of the firms reported higher input prices this month, up from 55% last month,” the survey noted. “With respect to prices received for firms’ own manufactured goods, 35% of the firms reported higher prices, up from 18%.” The spread between the two has ballooned out to 44. While somewhat anecdotal, these kinds of data points don’t appear to bode well for margins.
Coming full circle, this could feed the reflationary/inflationary narrative. Although it’s a noisy series, the market is on high alert for evidence of price pressures. This is incremental in that regard, that’s for sure.
