PMI Shows Early 2021 Price Pressures Materializing

The U.S. Feb PMI figures came in largely in line with expectations, with Manufacturing slightly weaker than expected at 58.5 (58.8 survey) and services a bit stronger at 58.9 (58.0 survey). The composite figure of 58.8 was the highest since March 2015.

• According to the IHS Markit report, moderating manufacturing growth was "often blamed on extreme weather and existing widespread supply shortages. Supplier delays hit a record high during the month." Meanwhile Services output was the highest since March 2015.
• Perhaps most notable - given widespread market and Fed expectations of a year-on-year inflation surge in H1 2021 - is a decade high in both input and output costs. The report implies that businesses appear to be passing along prices to consumers.
• From the release: "Input costs across manufacturing and services soared higher as demand outstripped supply...as a result, firms raised their selling prices at the sharpest rate on record (since October 2009), with panellists stating the increase was due to the partial pass-through of greater costs to clients."
• That pass-through was possible due to "strong demand conditions", though employment growth remained "relatively muted".