Will The Great American Migration From Cities Last?

The September Markit flash PMI fell 0.2 to 54.4 which is a 2 month low. It’s still in fine shape. As the economy improves, it’s tougher for PMIs to stay high because they ask how the economy is doing compared to the prior month. That’s how we saw such a sharp recovery in the PMI this spring as seen in the chart below. The services activity index fell 0.4 to 54.6 which also was a 2 month low. The chief business economist from Markit stated, “US businesses reported a solid end to the third quarter, with demand growing at a steepening rate to fuel a further recovery of output and employment.”

The manufacturing sector is improving quickly as it is known to do. That’s especially the case in this cycle because goods sales have beaten out services sales due to the pandemic. Manufacturing is always deemed an essential service, while services aren’t always essential (bars & restaurants). The manufacturing PMI rose from 53.1 to 53.5 which is a 20 month high. Manufacturing output hit a 10 month high. It’s not just this report showing strength. We already discussed in a previous article, that the Empire Fed manufacturing index rose from 3.7 to 17. In addition to that, the Richmond Fed index rose from 18 to 21.

Fed Doesn’t See Inflation Getting To 2% Soon

The Philly Fed index fell slightly from 17.2 to 15. However, the expectations index was up from 38.8 to 56.6. That increase was mostly driven by higher prices which is shocking because of how low everyone thinks inflation is. In fact, FOMC member, Rosengren said “We’d be lucky to get 2% inflation within” four years” according to Reuters. That shows a scary amount of complacency since low commodities prices could lead to low supply in the future. Specifically, the prices paid index was up 20 points to 57.7 and the prices received index was up from 30.2 to 42.4. We’re not making a grandiose call on inflation. We’re just reporting the numbers and saying some Fed members might be too sanguine in their projections for low inflation.

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