Wednesday, July 02, 2008
Although the markets interpreted the latest ISM Manufacturing report as bullish news because the headline index rose above the key 50 level, the details were more bearish. Both production and new orders were basically flat and employment turned more negative. And even more importantly, the prices paid index rose to a full 91.5, the highest since July 1979. Yeah, that's right, this price indicator signals the worst inflationary pressures since before Paul Volcker broke the back of the great inflation of the 1970s. While one should take the exact levels of these kind of survey based numbers with a grain of salt, this is consistent with the sharp increase in market price numbers we've seen and so clearly indicates very strong inflationary pressures.