Economy

February Flash PMI Readings Indicate Further Price Hikes and Wage Pressures

Jon C. Ogg

Published: February 21, 2018 10:30 am

Last Updated: January 12, 2020 3:12 am

IHS Markit has released its February “Flash PMI” (Purchasing Managers Index) report. Both the manufacturing and services readings came in rather strong at 55.9. That composite reading of 55.9 is up from 53.8 in January, and it also happens to be a 27-month high. Bloomberg was calling for a composite level of 54.0.

As far as how the 55.9 readings in manufacturing and services compared to individual component expectations, Bloomberg had a consensus of 55.0 on the manufacturing side and 53.5 on the services side. While the composite (average) was a 27-month high, the services report was a six-month high and the manufacturing report was a 40-month high.

Data for the report were collected between February 12 and February 20. For those concerned about wage pressures and cost pressures, that trend is apparently continuing here in February.

IHS Markit noted a robust upturn in private sector payroll numbers, and the increase in staffing levels was the most marked since August 2015. The cost pressures for businesses as a whole were shown to have continued intensification in February. In fact, IHS Markit showed these input price hikes to be the sharpest recorded since July 2013. The report noted that higher cost burdens and improving client demand contributed to the fastest rate of prices charged inflation for almost three-and-a-half years.

IHS Markit said of the February Flash PMI readings:

February data pointed to similarly sharp increases in both manufacturing production and service sector activity. The latter recorded a much stronger rate of expansion than at the start of 2018, helped by the largest rise in new work received by service providers since March 2015.

IHS Market even gave a relative reading here for how this is looking for U.S. gross domestic product:

Business activity growth accelerated markedly in February, suggesting the economy is growing at its fastest pace for over two years. The upbeat February PMI surveys are indicative of GDP rising at an annualized rate of 3.0%… Even faster growth is signaled for coming months. February saw the largest influx of new orders for almost three years, while business expectations about the year ahead jumped to the highest since May 2015… Such optimism encouraged firms to step up their hiring, with payroll growth reaching a two-and-a-half year high, underscoring the broad-based bullish mood across the business sector.

IHS Markit surveys roughly 1,000 manufacturing and services business to determine its results. This flash report is issued roughly 10 days ahead of the final PMI readings each month. Readings above 50 indicate that output is growing and those under 50 signal that output is falling. Final February data will be published on March 1 for manufacturing and March 5 for services and composite indicators.