The US services sector was robust during the final month of the first quarter.
Or at least according to ISM’s gauge, which printed 58.3, in line with consensus and up from February (figure below).
The prices component rose to 83.8, the second-highest in history, underscoring persistent (and likely accelerating) inflation.
The final read on S&P Global’s services sector gauge for the US economy moved lower from the flash print, but at 58, remained suggestive of a brisk expansion.
The data had virtually no capacity to move markets, but the ISM print may help allay growth concerns following a lackluster read on the manufacturing index late last week. Some analysts contend the factory gauge, and specifically the marked deceleration in new orders, bodes ill for equities in the months ahead.
In that context, anecdotal evidence of service sector resilience was reassuring. The activity, new orders and employment components in the ISM survey all moved higher in March. “There was an uptick in business activity, but respondents have indicated that they continue to be impacted by capacity constraints, logistical challenges and inflation,” ISM’s Anthony Nieves said, in a press release. He cited “slight” progress on labor shortages, but noted that “geopolitical concerns” are driving up the cost of materials, especially fuel and chemicals.
In the color accompanying the S&P Global release, chief business economist Chris Williamson described torrid demand. “Demand for services is in fact growing so fast that companies are increasingly struggling to keep pace with customer orders, leading to the largest rise in backlogs of work recorded since the survey began in 2009,” he said. That’s good news, except that it virtually guarantees more inflation.
A new poll conducted by Momentive on behalf of the “CNBC + Acorns Invest in You” initiative (don’t ask, I have no idea either), showed 81% of US adults now expect a recession in 2022. The subheading on the accompanying blog post said “the overwhelming majority of Americans fear higher prices will force them to rethink their financial choices in the coming months.”
Commenting further on Tuesday, S&P Global’s Williamson reiterated familiar talking points. “With firms’ costs inflated by the soaring price of energy, fuel and other raw materials, as well as rising wages, prices charged for services are rising at an unprecedented rate,” he said, adding that “consumer price inflation therefore looks likely to accelerate further as we head into the spring.”
Brainard missed exploding inflation a year ago, as did every member of the Fed Troop, but here we are with the same cooks in the same kitchen making the same recipe.
I personally empathize with everyone who ended up with pandemic stimulus support. I was fired from a job and benefited from government cash flow, but it stopped and I’ve tried to adapt.
What I seriously don’t understand, is the disconnect between my support being stopped, while the Fed continued a massive support effort for banks. That simplifies the dynamics if the Fed asset QE, but that’s the core issue here in terms of why the Fed didn’t reduce QE earlier.
Apparently micro tapering is going on now, but why wasn’t that effort far more aggressive a year ago? It simply seems like the pace of Fed QE was too much for too long, which greatly compounds there solution to fix the mess they created.
At this late stage, raising rates seems like using a jackhammer to thread a needle and it seems headed for failure. As for dumping all their assets at an accelerated pace, that’ll most likely turn a weak recovery and mild recession into a generational disaster, which will be compounded by an entirely new era of republican austerity and social decay. The future doesn’t look bleak it looks like a black hole colliding with a supernova.
“In addition, markets expect the Fed to lay out a plan at its May meeting for running down some of the nearly $9 trillion in assets, primarily Treasurys and mortgage-backed securities, on its balance sheet. According to Brainard’s Tuesday comments, that process will be swift.”
Wait, so you’re against the policy of the past year because it was too loose, but also against balance sheet rundown and rate hikes now?
Farmhouse,
I’m confused as to why there is a divergent difference between helping mainsteet in the form of unemployment support, versus the extended current liquidity offered to banks, who are hoarding money.
Unemployed people were denied the government teats because the economy was recovering, but as wall street turned in excessive profit gains, the Fed Test is still drizzling with nonstop juice. That weaning imbalance doesn’t make sense, because the Fed is purposefully fattening banks with taxpayer milk.
A lot of QE is hard to fathom, and I’m not entirely exactly sure of the macro picture of how the Fed asset programs filter down to poor people like me, but as I said, I’m confused.
While I’m here, here’s an interesting collection of thoughts provided by our neighbors at the Washington Post:
Inflation has Fed critics pointing to spike in money supply
But central bank officials say economy has changed since high-inflation days of the 1970s
By David J. Lynch
February 6, 2022 at 9:2
The money supply is growing at a 13 percent annual rate, which until the pandemic was the fastest growth since the late 1970s. Even if the Fed acts quickly to cut that increase in half, annual inflation will top 6 percent through 2024, said Hanke.
“It’s like a doctor. If you have a defective thermometer, your prescription could be way off,” said Hanke. “The Fed’s thermometer is defective.”
The money supply went up, but the velocity went down,” said former Treasury official David Beckworth, now with the Mercatus Center at George Mason University. “They’ve parked it. They’re not spending it
Hanke said the problem lies with the Fed’s metrics: The Divisia measure shows that the money supply grew much less during that period than the traditional data suggests. But he acknowledges he has made few converts at the central bank.
My smartphone changes many things, like converting your name and the word t e a t
I’ve given up on editing stuff. It wasn’t me
The phone overrides some corrections, my apologies.
In comments today, Mary Daly soft-pedals a soft landing with two words. She still doesn’t “see” a recession, but thinks the economy “could teeter, but nothing that tips us into recession this year” Ah, well, yes, not this year…