• Prior was 49.8
• Manufacturing 54.0 vs 52.5 expected – -highest since May 2022
• Prior manufacturing 52.4
• Composite 52.0 vs 50.5 expected
• Composite prior was 51.4
• Employment basically flat for a second month
• Input cost inflation at an 11-month high
• Output prices rising at the fastest pace since July 2022

This is a two-month high in services and a nice surprise but the real headline number is on manufacturing, which is the best in almost four years. The US manufacturing sector has largely been in something of a recession for all of that time and this is a good signal that it’s turning the corner, despite higher energy prices. However there is some fine print: a big chunk of that new orders surge is companies panic-buying ahead of war-related shortages and price hikes.

Unfortunately, the services side — which is what actually drives the US economy — barely budged off the floor and new business growth was the slowest in two years.

The more important story is on prices. Output prices jumped the most since mid-2022 and input costs are running at an 11-month high, with supply chains snarling up in a way we haven’t seen since the post-pandemic mess.

Survey chief economist Chirs Williamson sums up the Fed’s problem nicely:

“Balancing the risks of inflation lifting sharply higher against the underlying weakness of economic growth presents policymakers at the Fed with a growing dilemma. However, it will likely be increasingly hard to make a case for rate cuts if inflation follows the path signalled by the PMI while the economy continues to eke out only modest growth.”

The survey says it’s consistent with “growth in excess of 1%” which isn’t exactly blockbuster but it’s still growth but is also coming with spiking prices.