US Manufacturing Sector Survey Hits 53-Month High, But "Cost Pressures Remain Key Concern"

After surging in September (and prompting some exciting moves in Treasuries - and STIRs), preliminary October PMIs from S&P Global were expected to drop modestly (for both Manufacturing and Services).

Instead it was more mixed with Manufacturing better than expected (56.0 vs 55.9 prior vs 55.5 exp) but Services down a little (57.9 vs 58.8 prior vs 58.0 exp).

That is a 53-month high for the Manufacturing sector...

The US remains the strongest economy in the world based on these surveys...

“October’s flash PMI data indicate that the US economy continues to boom at the start of the fourth quarter," according to Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.

The output readings from the survey are consistent with GDP growing at a 5% annualized rate after a 4% expansion was signalled for the third quarter.

Especially healthy corporate earnings and profits are also indicated, and hiring has surged as companies seek to boost capacity to fulfil stronger customer demand.

“If the reopening of the economy after COVID is excluded, recent months have seen the best growth spell for US businesses since early 2015."

However, Williamson notes that "cost pressures remain a key concern, notably as the renewed surge in oil prices reverberates through to impact a wide variety of goods and services."

Supply chain bottlenecks have meanwhile intensified, and order book backlogs are growing, making it easier for companies to pass higher costs on to customers.

The result is the sharpest increase in selling prices for over four years to a pace that indicates consumer price inflation is likely to rise further above the Fed’s target in the coming months.

Not a good signal for The Fed next week.