Commodity Price Pressures Ease in the US

The gap between supply and consumer demand created by fiscal stimulus in 2020 and early 2021 appears to be narrowing, as indicated in the latest ISM report on activity in the US manufacturing sector. The headline index fell slightly – from 61.4 to 58.8 points (forecast 60), however, the behavior of individual components is much more interesting. Take for example Prices Paid index which reflects producers’ costs spent on materials and intermediate goods and is often considered as a proxy of future consumer inflation. It rose rapidly in the second half of 2020 and remained at elevated levels in 2021, however there was a sign of U-turn in price pressures as the index plunged from 82.4 in November to 68.2 in December!

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