Supply Chain Monitor

The February ISM Manufacturing PMIs suggest a slowdown, but the commentary indicates that the slowdown is both expected, and not an indication of further erosion in the demand picture.

Some commentators have noted that supply-side disinflation may be reaching an end point, but it is also clear that the supply-side pricing pressures of the pandemic era are over.

Overall industrial production stayed flat year over year in the January data, and shrank by 0.1% month over month.

The soft data for January came in strong following a blockbuster Q4 GDP report and a lackluster January jobs report. Both ISM Services and Manufacturing saw upturns relative to their December reports.

GDP growth this quarter was supported by consumption and government spending, while investment played a more muted role.

Overall production inched up, with headline industrial production rising 0.1% month-over-month for a 1% year-over-year increase.

One way we can think about how present inflation is different from the 1970s experience is by looking at the difference in price changes for capital goods.

Today saw the release of the December ISM report, the first real soft data since the Fed confirmed the hiking cycle is over. Overall manufacturing ticked up, contracting at a slower rate than in previous months, suggesting the beginnings of a turnaround.

We closely track developments in production to understand how the economy is reacting to changing policy and conditions.