PMI data suggests that US  inflation likely to remain elevated

• US PMI surveys for November showed mixed data
• US Service Index drops to lowest in two months
• US Manufacturing Index rose more than expected to 59.1

Today's PMI surveys showed a mixed picture of the US economy. The IHS Markit US Manufacturing PMI increased to 59.1 in November  from a 10-month low of 58.4 in October, beating market forecasts of 59.0, preliminary estimates showed. Output accelerated as inflows of new orders expanded at a sharper pace. Still, production continued to be hampered by raw material delays and labour shortages, with vendor performance deteriorating substantially yet again. Also, cost burdens rose at a series record pace and firms increased their selling prices at the second-steepest pace in over 14-and-a-half years. Finally, output expectations for the year ahead strengthened to the highest for three months amid hopes of increased stability across labour markets and supply chains according to Markit Economics

On the other hand Services PMI dropped to 57.0 in November, from 58.7 in the previous month and below market consensus of 59.0, a preliminary estimate showed. Still, the latest reading signaled a sharp expansion in the service sector activity on the back of greater travel both domestically and internationally and the further easing of COVID-19 restrictions. New business growth slowed to the slowest since August 2020, although it remained strong overall as firms acquired new clients and new projects. Meanwhile, pressure on capacity persisted amid labor shortages, with backlogs of work rising at the second-fastest pace on record, according to Markit Economics.

Today's data was expected to show improvements in both segments of the economy, despite negative sentiment among US consumers. However, the manufacturing sector rebounded only slightly from 58.4 to 59.1, while services fell from 58.7 to 57.0. Source: Bloomberg via ZeroHedge
Chris Williamson, Chief Business Economist at IHS Markit, considered the US economy continues to run hot. “Despite a slower rate of expansion of business activity in November, growth remains above the survey’s long-run pre-pandemic average as companies continue to focus on boosting capacity to meet rising demand.” He added the slowdown “underscores how the economy is struggling to cope with ongoing supply constraints.”

However despite this upbeat narrative, today's report showed that inflation is gaining steam. The survey’s measure of prices paid by businesses for inputs surged to 78.1, which is the highest level since the series started in 2009, from 74.1 in October. Meanwhile input cost inflation hit a six-month high. These higher prices are being passed on to consumers, indicating that inflation could remain elevated for a longer period of time, contrary to Fed Powell assurances, that this is only a transitory phenomenon.