I’m not sure where we are this week when it comes to the good news-bad news dichotomy for the US economy.

Last week, bad news was just bad news when both retail sales and factory output disappointed on the same day. Ostensibly, that suggested the economy was decelerating too fast for comfort, outweighing any dovish read-through for Fed policy.

The next day, below-consensus jobless claims underscored a resilient labor market, which argued for Fed persistence. By Friday, stocks were on the front foot as markets looked to front run the February step down to 25bps hike increments.

You can write your own script, and when you do, you can incorporate better-than-anticipated flash reads on S&P Global’s PMIs for January, but don’t forget to note that “better” is a relative term. At 46.6, the services gauge was ahead of estimates and the highest since October, but it tipped a seventh month of contraction.

The manufacturing index likewise ticked higher, but it too remained squarely in contraction territory.

A gauge of input prices on the services side rose sharply from December, and an index of services hiring fell. The employment gauge on the factory side slipped below 50 to the lowest since July of 2020.

Recall that both the ISM factory and services surveys fell last month (markedly so on the services side), validating recession concerns. The S&P readings, although better than forecast, were still indicative of a decelerating economy which, as noted here at the outset, is either good news, bad news or somewhere in-between depending on what day it is.

Certainly, the pick up in cost pressures wasn’t welcome. “January data indicated a faster increase in cost burdens at private sector firms,” the color accompanying the release said. “Although well below the average rise seen over the prior two years, the rate of cost inflation quickened from December and was historically elevated.”

When taken in conjunction with the contractionary headline prints, the uptick in costs was stagflationary. Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said as much on Tuesday.

“The worry is that not only has the survey indicated a downturn in economic activity at the start of the year, but the rate of input cost inflation has accelerated into the new year, linked in part to upward wage pressures,” Williamson wrote. “[That] could encourage a further aggressive tightening of Fed policy despite rising recession risks.”