Stagflation? From the USA there are signs of problems on prices and production

The forecast data of the US PMI index were made public today and, after a peak that had not been seen for some time the previous month, there was a reduction:

As we can see, the PMI manufacturing index hit a high the previous month, and then recoiled. Yet the US sees an exploding demand and this has gone so far as to drive inflation up:

What is the cause of this moment that we would call “Stagflation”: decrease in manufacturing, but increase in prices. A situation that can be explained by the problems in logistics.

The problem can be seen in this table which breaks down the performance of the individual components of the PMI index. Let's see how the “Supplier deliveries” factor is negative, while it is normally positive, and it means a pessimism in the possibility of receiving the orders placed.

This is even more visible by comparing the forecast index of prices charged by suppliers, in green, with the index relating to deliveries from suppliers, in red. The index shows how prices are rising, but deliveries are blocked by bottlenecks related to transport or production chains in general.

So the demand started, due to the powerful financial stimulus, behind this demand there was no departure of the supply, both for previous structural constraints and because the production machine is still slowed down by the consequences of the lockdowns. We have a stagflationary flare-up, or rather in which supply and demand cannot walk at the same speed. The results can be two: a temporary inflationary flare-up, which will subside with the increase in supply, or a “1970s” economic crisis.

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The article Stagflation? From the USA, signs of problems on prices and production come from ScenariEconomici.it .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/stagflazione-dagli-usa-segnali-di-problemi-su-prezzi-e-produzione/ on Mon, 03 May 2021 17:00:41 +0000.