Not that long ago, inflation was all anyone could talk about.
Was it coming? Was it already here? How bad would it be? How long would it last?
Turns out, those fears were overblown, at least according to a new report from the Institute of Supply Management. The survey, which covers the prices being based on raw materials, found that while pricing pressures remain elevated the rise has slowed as of June.
In detail, ISM’s price paid sub-index fell 1.1 points in June. Yes, it is still extremely high at 79.5 — anything over 50 indicates that prices are rising — while findings below 50 represent sector-wide contractor.
That slowdown by the fall is exactly what economists have been predicting all along.
Quote: “Looking ahead, re-openings and rising confidence fueled by the much-improved health backdrop – despite the recent uptick in cases — will continue to propel the services boom. Labor shortages and high input costs will restrain the expansion. Still, those pressures should slowly lessen in the second half of the year.” — Nancy Vanden Houten, lead U.S. economist at Oxford Economics.
Some more data: In addition to the supply chain numbers, IHS Markit recently finalized its findings on service sector prices as of June and, guess what, although prices are still rising the rate of growth there is falling rapidly.
According to IHS Markit, inflation metrics peaked in May of this year. Since then, key indicators and the level of market concern have already dropped while the rate of price increases also decline. So while costs may still be rising across the board, they are doing so at a less dramatic rate than they were in May. So, these cost pressures appear to be transitory, which helps quell fears of inflation and brightens the outlook for businesses.
Takeaway: We’re been watching inflation fears spiral all year, with economists continuing to beat the drum that things weren’t as dire as they appeared and that inflation would level off and even start to pull back by the end of the year. Well, it’s starting to look like they may have been right after all.
