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Global PMI signals fastest rise in firms' input costs since
2008
Charges for goods and services both rise at steepest rates in
PMI survey history
US sees sharpest price hikes, led by rising prices for consumer
goods
Inflationary pressures have risen worldwide to the highest for
at least a decade as a surge in demand is accompanied by widespread
supply constraints in the provision of goods and services. The
survey data point to a steep rise in consumer price inflation
across the world in coming months, most notably in the US, where
prices charged for consumer goods rose especially sharply.
Steepest cost pressures since 2008
The input prices index from the JPMorgan Global Composite PMI,
compiled by IHS Markit from its proprietary business surveys, rose
to its highest since August 2008 in March, indicating by far the
steepest rate of input cost inflation seen since the global
financial crisis. Costs have now risen globally over the past ten
months, having fallen sharply in April and May 2020 as demand
collapsed amid the initial lockdowns due to the coronavirus disease
2019 (COVID-19) pandemic, with the rate of inflation rising
markedly since the turn of the year.
The increase in costs has fed through to the steepest increase
in average selling prices for goods and services for over a decade,
the recent rate of increase greatly exceeding anything seen since
comparable data were first available in late-2009.
Record price hikes for services and goods
Upward price pressures showed signs of spreading from
manufacturing through to services, and also to consumers.
Manufacturers' material prices rose at a pace not exceeded since
April 2011, the rate of increase accelerating markedly on February,
while service sector costs (which includes wages, rents and other
costs as well as materials and fuel) registered the largest gain
since September 2008.
Both manufacturing selling prices and average rates levied for
services meanwhile rose at survey record rates, data for which were
first produced in 2009.
Near-record supply shortages
Factories again reported that higher costs reflected rising
commodity prices as demand revived and economies recover from
lockdowns, often exacerbated by supply shortages. Supplier lead
times lengthened at a near-record rate in March, due to both a lack
of production capacity and logistics delays. The latter resulted in
higher shipping costs for many goods.
It was not surprising to therefore see that the highest price
pressures were recorded for intermediate goods - products sold as
inputs to other companies, such as electrical and electronics
components - as companies not only sought to ensure adequate supply
for current production, but also often sought to build additional
stocks to safeguard against future supply issues. Average selling
prices for intermediate goods consequently rose at the fastest rate
yet recorded since data were first available in October 2009.
A survey high was also recorded for prices charged for
investment goods, such as machinery and equipment, while consumer
goods prices increased at the steepest rate for a decade, mainly
reflecting the pass-through of these higher intermediate goods
prices to final products, as well as greater shipping costs.
However, in one of the strongest indications that the upturn in
price pressures is filtering beyond manufacturing, a survey high
was also recorded for rates charged for business-to-business
services.
Offsetting some of the upward pressure on overall prices was a
fall in charges for financial services - the first such decline
since last October - and only a muted rise in the cost of consumer
services, which remain hard-hit by the pandemic.
Margins squeezed amid record cost increases
Looking into the sector data in more detail, only banking and
transportation charges fell during March, with the latter down only
very marginally. However, while the banking sector also reported
lower costs during the month, meaning its margin squeeze was the
lowest of all sectors covered by the PMIs, the latter saw a survey
record rise in costs, pointing to heavily squeezed margins.
Record cost increases were also seen in tourism &
recreation, tech equipment, other machinery & equipment,
general industrials and paper & forest products, all of which
also saw their PMI margin indicators squeezed to especially marked
extents.
US reports sharpest price pressures
Price trends also varied markedly among the world's major
economies, especially in terms of consumer goods.
The steepest increase in average prices charged for goods and
services was seen in the US, where the latest rise was the steepest
recorded since survey data for the US were first available in 2009.
Especially steep increases were also seen in the UK, which saw the
largest monthly rise since November 2017, as well as in Brazil and
Russia, where increases were among the highest recorded by the
surveys.
Selling price inflation meanwhile hit the highest since the
start of 2019 in the eurozone and the highest since November 2016
in China.
In contrast, only a muted rise in average goods and services
prices was seen in India, and Japan reported a marginal decline,
albeit registering the weakest fall since the pandemic began.
One of the most important drivers of the above-average rise in
selling price inflation in the US was an especially steep hike in
prices charged for consumer goods. Not only did US consumer goods
producers report the largest rise of all major goods and services
product sectors ever recorded by IHS Markit's US survey, but the
rate of increase far exceeded that reported in Europe and Asia,
hinting at an especially marked pass-through to consumer price
inflation in the US.
Chris Williamson, Chief Business Economist, IHS
Markit
Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.
