Inflation Fears Set In As US PMIs Surge to Record Highs in May
Inflation warnings are flashing an even brighter red, as the latest PMI flash reading surged to yet a new record in May.
According to IHS Markit survey data published on Friday, the preliminary Manufacturing PMI surged from 60.5 to a record 61.5 in May, despite economists’ projections calling for an unchanged reading of 60.5. Similarly, the PMI reading for the service sector soared to yet another record of 70.1, following a reading of 64.7 in the previous month. Economists surveyed by the Wall Street Journal forecast a 64.3 reading.
The US economy has been accelerating faster than expected, especially as Covid-19 restrictions continue to lift and businesses reopen their doors. The service sector in particular has noted strong gains in recent months, exceeding all previous records by a significant margin. In fact, according to IHS Markit chief business economist Chris Williamson, growth would have been even higher had businesses not been “constrained by supply shortages and filling vacancies.”
However, despite the strong economic optimism heading into the summer months, the latest PMI reading also brings to light a different unappealing reality. As Williamson notes, “the May survey also brings further concerns in relation to inflation, as the growth surge continued to result in even-higher prices. Average selling prices for goods and services are both rising at unprecedented rates, which will feed through to higher consumer inflation in coming months.”
It appears that Mr. Powell may be asleep at the wheel.
Information for this briefing was found via IHS Markit. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.