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Inflation’s back in the chat
The latest flash PMI numbers came in looking deceptively upbeat on the surface: business activity expanded, manufacturing perked up, and services barely stayed in the black. But the headline hide-and-seek ends there, because the price gauges underneath were the real story — and they were hot, hot, hot.
Average prices charged for goods and services climbed at the fastest pace since July 2022, with service-sector selling prices hitting a 45-month high. In plain English: companies are having an easier time passing costs on to you, which is exactly the kind of thing the Fed hates to see when it’s trying to cool inflation without snapping the economy in half.
The supply-chain ghost is back
It wasn’t just prices. Suppliers got slower, companies said they were doing “panic” and “emergency” buying, and input costs kept climbing. That’s the kind of combo meal that usually ends with higher shelves prices later, because businesses don’t swallow those costs forever out of the goodness of their hearts.
At the same time, hiring softened. Manufacturing headcounts fell for the first time in nine months, and overall job growth barely budged. So now you’ve got the Fed staring at a nasty little spreadsheet problem: inflation re-accelerating while growth still looks more meh than mighty.
Why markets care
S&P Global’s Chris Williamson basically spelled out the dilemma: if inflation keeps moving higher and growth only crawls, rate cuts become a tougher sell. Translation: the market’s dream of easy money might need to wait in line.
That’s why the S&P 500 and Nasdaq-heavy QQQ were a touch softer in early trading. Big picture: when inflation heats up faster than the economy, investors start pricing in fewer hugs from the Fed and more “not so fast” instead.