ISM data points to record firm activity growth

Güncel


We continue to receive strong economic data showing that the US is leading the global economic recovery. While Europe, one of the other main economies, is improving its vaccination and closing the gap, we see that Japan is still dealing with the negativities caused by the Covid-19 outbreak. Manufacturing and services activity expand more rapidly in the United States. The May ISM manufacturing index, announced today, stood at 61.2, while the Markit manufacturing PMI rose to 62.1. Manufacturing orders continue to rise, while the inflation indicator still points to a steep rise. While this situation confirms the inflation risks, it actually shows the necessity of examining another dimension of inflation.

 

There is a CPI being heavily dragged up by the PPI, and this approaching trend also increases the risk of a long-term inflation pressure. The sharp rate of increase in the prices of goods and services continues, the reflection of this situation will be more challenging when we take into account the supply problems and the effects it creates. Some deliveries are delayed in sectors such as automotive, the main reason for this is the chip crisis. In addition, activities such as crypto mining cause an excessive increase in computer equipment, especially video graphics card prices. It goes without saying that this also increases the energy consumption excessively. Delivery delays also have the potential to put pressure on new orders and production. Inflation actually points to a problematic situation rather than a recovery reflecting one.

 

Central banks have done their part by giving excess liquidity in the pandemic, but the question now is how to manage the boom in the economy this time around. Employment still has a long way to go and raising interest rates should not hurt especially small firm activity. A smooth transition is needed to increase funding rates. On June 15-16 this month, the Fed will make important statements on “tapering”, and before that, May non-farm payrolls, which will come on Friday, stand out as the most important data. Undoubtedly, a strong data will increase the pressure for “tapering”.

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Hibya Haber Ajansı