Eurozone flash PMI hits 21 year high as economy reopens

Eurozone business activity grew at the fastest rate for 21 years in July as the economy continued to re-open from COVID-19 restrictions. The strongest rise in service sector activity for 15 years was tempered, however, by a slowing in manufacturing output growth, linked in many cases to worsening supply lines.

Prices charged for goods and services meanwhile rose at a pace unseen prior to June as demand again outstripped supply. Backlogs of work rose at a joint-survey record rate amid capacity constraints.

Business confidence meanwhile took a hit from rising concerns over the delta variant, pushing sentiment for the year ahead to a five-month low.

The headline IHS Markit Eurozone Composite PMI® rose from a 15-year high of 59.5 in June to 60.6 in July, its highest since July 2000, according to the preliminary ‘flash’ reading*.

The July reading indicated a fourth consecutive month of accelerating business activity. This acceleration of growth has coincided with a steady easing of COVID-19 restrictions from a peak in April to the lowest since the pandemic began in July.

A further increase in demand was also recorded, boding well for the strong upturn to be sustained into August, as new order growth measured across both manufacturing and services accelerated to the fastest since May 2000.

However, the recent surge in demand continued to put pressure on operating capacity to a degree unprecedented in the survey’s history. The resulting steep rise in backlogs of uncompleted work matched the record increase seen in June.

Firms hired additional staff for a sixth straight month to meet the upturn in demand. The net gain in employment was the second-steepest since January 2018, and among the largest recorded over the last two decades, though moderated compared to June.

The overall improvement on June’s performance was led by the service sector, where growth accelerated to the fastest since June 2006, marking a fourth successive month of rising output. The removal of some pandemic-related travel restrictions notably led to the largest rise in services exports since comparable data were first collected in 2014.

While manufacturing reported a thirteenth successive month of output growth, the rate of expansion slipped to the lowest since February. In many cases, notably in Germany, output was constrained by shortages of inputs.

Average selling prices for goods and services meanwhile rose at a near survey record pace in July, primarily reflecting constrained supply at a time of rapid demand growth.

  

Supplier delivery times – a key barometer of supply chain delays – continued to lengthen at one of the sharpest rates ever recorded by the survey, playing a key role in driving input costs higher. Manufacturers’ input prices rose to a degree unsurpassed since survey data were available in 1997. Service sector input cost inflation eased modestly, but remained the second-highest in 13 years.

Within the eurozone, Germany led the upturn, reporting the strongest monthly expansion since comparable data were first available in January 1998. An unprecedented service sector expansion was accompanied by even stronger – though cooling – manufacturing output growth.

The rate of expansion moderated to a three-month low in France, thanks mainly to slower service sector growth, though remaining among the strongest seen over the past three years. Growth in the rest of the eurozone as a whole meanwhile accelerated to the sharpest since June 2000.

Finally, while July’s growth surge was commonly linked to the further easing of virus restrictions, business optimism for the outlook was stifled by growing worries about the delta variant. Expectations for output in the year ahead slipped from June’s record peak to the lowest since February, with lower optimism recorded across the board but slipping most notably in services and in France.

U.S. Initial Unemployment Insurance Claims Unexpectedly Jumped

Initial claims for unemployment insurance unexpectedly rose to 419,000 in the week ended July 17 from an upwardly revised 368,000 (originally 360,000) in the previous week. The Action Economics Forecast Survey expected 350,000 initial claims. The four-week moving average edged up to 385,250 from 384,500. Initial claims are typically volatile in the summer owing to plant shutdowns and school closings.

Initial claims for the federal Pandemic Unemployment Assistance (PUA) program rose to 110,257 in the week ended July 17 from a slightly downwardly revised 96,287 in the previous week. The PUA program provides benefits to individuals who are not eligible for regular state unemployment insurance benefits, such as the self-employed. Given the brief history of this program, these and other COVID-related series are not seasonally adjusted.

Continuing claims for regular state unemployment insurance in the week ended July 10 fell to 3.236 million, the lowest since the week ended March 21, 2020, from 3.265 million in the prior week. The insured rate of unemployment held at 2.4%, a post-pandemic low. The rate reached a high of 15.9% in the week of May 9, 2020.

Continued claims for PUA fell to 5.134 million in the week ended July 3, the lowest since the week ended April 25, 2020, from 5.687 million in the prior week. Continued PEUC claims again fell sharply to 4.135 million in the week ended July 3 from 4.710 million in the previous week. The Pandemic Emergency Unemployment Compensation (PEUC) program covers people who have exhausted their state unemployment insurance benefits.

In the week ended July 3, the total number of all state, federal, PUA and PEUC continuing claims declined to 12.574 million, the lowest level since the last week of March 2020 and a decrease of 1.263 million from the previous week. The level is down from a high of 33.228 million in the third week of June 2020. These figures are not seasonally adjusted.

Are these 1.26 million now looking for a job?

COVID-19

Another wave of COVID-19 cases in the U.S. will likely have less economic cost. This assessment is based on the experience in the U.K. to date. The Google Mobility
measure of consumer activity in the U.K. in retail and recreation has declined modestly since the cases began to increase rapidly. In the U.K., the Google Mobility measure of consumer activity also remains well above that seen at the beginning of the year. For the U.S., a number of the high-frequency measures that we monitor have softened a little, but nothing that raises a red flag. According to YouGov, in neither the U.K. or U.S. has social distancing—avoiding going to shops or to public gatherings—changed significantly over the past several weeks. (Moody’s)

• Republicans urge supporters to embrace vaccines in abrupt shift of tone Strategists say party fears being blamed for surge of infections in red states
• Pfizer Inc.’s vaccine was just 39% effective in preventing people from being infected by the delta variant in Israel in recent weeks, according to the country’s health ministry, though it protected strongly against hospitalization and severe illness. Los Angeles County’s top health official said fully vaccinated people made up one-in-five Covid-19 infections in June and warned that the figure may rise in July with a higher level of community transmission. (Bloomberg)

INFLATION!?

• How Much More Will Your Oreos Cost? Companies Test Price Increases Faced with higher costs for materials, transportation and workers, U.S. companies are charging more for products from groceries to industrial goods. A test will come later this year when buyers will have to choose whether or not to absorb additional increases.

This WSJ article adds to my yesterday’s Daily Edge.

(…) Of about a dozen large U.S. companies examined by The Wall Street Journal, most said they have succeeded in raising at least some prices but are unsure whether they can continue to do so. Several said they plan or hope to push additional price increases through.

“I don’t think anyone knows what the word transitory is really going to turn out to mean,” said Julien Mininberg, who heads consumer-products company Helen of Troy Ltd. (…)

In a poll of 606 U.S. businesses across industries, 33% said they are raising prices, while just 4% said they are cutting them, according to 451 Research, a unit of financial data firm S&P Global Market Intelligence. Retail and manufacturing businesses led the way, with 44% and 41%, respectively, increasing prices. (…)

The company’s primary response to inflation is to become more efficient, General Mills spokeswoman Kelsey Roemhildt said. But inflation is so high right now that productivity alone won’t solve it, she added. “Given the level of inflation that we forecast for the fiscal year, we will be using all tools in our pricing tool kit, including…list price increases where needed,” she said. (…)

• Tin Prices Reach Records as Delta Variant Disrupts Supply Prices are at all-time highs, lifted by wagers that coronavirus disruptions in Southeast Asia will fuel shortages of the industrial metal.

(…) The price of tin to be delivered in three months has soared to about $34,000 a metric ton on the London Metal Exchange in recent days, piercing its previous record from a decade ago. Prices are up about 9% this month and nearly 70% for the year. (…)

Tin is used to produce solder, a melted metal that connects computer chips to circuit boards, so demand has skyrocketed alongside purchases of consumer electronics during the pandemic. (…)

• Intel CEO Says Chip Shortage Could Stretch Into 2023 It could take one or two years to get back to a reasonable supply-and-demand balance in the semiconductor industry, Pat Gelsinger said in an interview after Intel posted largely flat second-quarter sales and profit.
• Thermal coal prices soar as demand for electricity rebounds Popularity of fossil fuel as a stopgap to generate power reveals difficulties of clean energy transition

U.S. Existing Home Sales Turn Up in June

The National Association of Realtors (NAR) reported that sales of existing homes rose 1.4% (+22.9% y/y) in June to 5.860 million (SAAR) after decreasing 1.2% in May to 5.780 million, revised from 5.800 million initially reported. These sales had in fact fallen for four consecutive months from 6.660 million in January. The Action Economics Forecast Survey expected sales of 5.940 million in June. These data are compiled when existing home sales close.

The June sales increase took place in three of the four regions of the U.S. The largest was 3.1% in the Midwest (+18.8% y/y), as sales there rose to 1.330 million from 1.290 million. In the Northeast, they rose 2.8% (45.1% y/y) to 740,000 from 720,000, and they rose 1.7% (23.7% y/y) in the West to 1.200 million from 1.180 million. Sales were unchanged in South at 2.590 million (+19.4% y/y)

The median price of an existing home increased 3.7% (23.4% y/y) to yet another record, $363,300. The median home price was highest in the West, where it rose 0.4% (17.6% y/y) to $507,000. Prices elsewhere were less high, but rose more vigorously in June. In the Northeast, the median price was $412,800, up 7.4% in the month, 23.6% y/y. The median home price in the South rose 4.2% (21.3% y/y) to $311,600. In the Midwest, prices increased 3.6% (18.5% y/y) to $278,750. The average sales price of all existing homes rose 2.7% last month (16.1% y/y) to $381,800. The price data are not seasonally adjusted.

The number of existing homes on the market rose 3.3% (NSA) during June, reaching 1.25 million at month end. This number was still down year-on-year, 18.8% for June, and still remained near the record low of 1.03 million units in January and February. These figures date back to January 1999. The months’ supply of homes on the market rose slightly for a fifth month to 2.6 months but remained well below its recent high of 4.6 months in May of last year.

Sales of existing single-family homes rose 1.4% (+19.3% y/y) in June to 5.140 million units (SAAR), the first month-to-month increase this year. Sales of condos and co-ops rose 1.4% (56.5% y/y) to 720,000.

• U.S. Median Home Price Hit New High in June Median price rose to $363,300 as sales increased 1.4% on strong demand
• BTW:

• Lumber Rises as Canada Wildfires Snarl Production, Shipments

Electric-Vehicle Sales Growth Outpaces Broader Auto Industry New plug-in models from Tesla, Ford, VW and others helped to boost demand, while hurdles still remain for the technology.

While still a sliver of the overall market, sales of plug-in vehicles more than doubled in the first half of 2021 compared with last year, when the pandemic sapped sales. That far outpaced the 29% rise for total vehicle sales, according to research firm Wards Intelligence.

(…) Tesla’s U.S. sales rose 78% through June this year, according to an estimate from research firm Motor Intelligence. The increase was helped by Tesla’s Model Y crossover SUV, which has quickly become the company’s top seller since being introduced last year. (…)

Auto companies collectively are spending $330 billion over the next five years to bring more plug-in models to showrooms, according to consulting firm AlixPartners LLP. (…)

“The EV shift is picking up speed, especially in the luxury segment,” Ola Källenius, CEO of Mercedes owner Daimler AG, said in a statement. “The tipping point is getting closer and we will be ready as markets switch to electric-only.” (…)

Results from a consumer survey released in June by UBS showed 37% of U.S. respondents said they were likely to consider an electric vehicle, up from 22% a year earlier. (…)

Goldman Sachs just raised its EV sales forecast for the next 20 years by 20%: “We now expect global EV sales volume to rise from 2mn vehicles in 2020 to 32mn in 2030 (previously 26mn), and 74mn in 2040 (62mn).”

• EV Batteries: The Next Victim of High Commodity Prices? Batteries have gotten a lot cheaper due to economies of scale, but rising commodity prices could upend that trend

Prices of lithium carbonate, used in cathodes, have doubled year-to-date, according to research firm Benchmark Mineral Intelligence. Prices for cobalt hydroxide, which boosts energy density and battery life, have risen more than 40%.

The pandemic has brought disruption, but the real problem is more fundamental, especially in lithium. “The oversupply that crashed prices from mid-2018 to mid-2020 caused multiple projects to be put on care and maintenance with other newer projects stalled,” says Scott Yarham, who leads battery-metals pricing at S&P Global Platts.

Benchmark Mineral Intelligence expects most battery raw-material markets to remain tight this decade. And it forecasts that the lithium market will fall into deficit in 2022. Most supply-chain contracts are “cost pass through,” which means EV manufacturers have to bear cost increases, says Caspar Rawles, head of price and data assessments at Benchmark. But battery makers still face margin pressure. Auto makers will push back when they can by playing different battery suppliers off one another. (…)

Raw materials now account for most of the cost of a battery: Cathode materials such as lithium, nickel and cobalt make up around 30% to 45% of the total, according to S&P Global Platts.

(…) China dominates the processing of chemical materials that go into batteries. It accounts for 65% of the production of anode materials and electrolytes and 42% of cathode materials, according to Goldman Sachs. (…)

Is shrinkflation transitory?

Whether it’s Family Size Cheerios in two different sizes, one fewer bag of M&Ms in a multipack, smaller Scott Shop towels or shrinking salads at Walmart, the shrinkflation subreddit is filled with recent posts complaining about camouflaged price changes. (…)

“The majority of the portfolio has been through the changes,” General Mills spokesperson Kelsey Roemhildt told Axios in response to a query about its products shrinking in size. (…) (Axios)

The Mouse Print web site displays products that are “shrinking inconspicuously right in front of your eyes”

  

TECHNICALS WATCH

Deviation from Trend Matches 2000 Tech Bubble High

The trend is not always your best friend…CMG Wealth’s Steve Blumenthal shares this NDR chart showing deviations in the real S&P 500 index from its +2.9% long-term trend:

We all know the valuation excesses of the late 1990s, P/E of 27 and Rule of 20 P/E of 30. The dot.com bubble finally burst and the S&P 500 cratered 46%.

The 1960s were more pernicious. There was a first peak in January 1966 (P/E of 18.3 and R20 P/E of 19.8), an 18% baby bear, and a second peak in November 1968 P/E of 19.2 and R20 P/E of 24.5) followed by a 33% mama bear. The complete Jan. ‘66 to June ‘70 roller coaster trip was only -5%, but considering that inflation totalled 23.6% during the period, the setback in real terms was almost 30%.

Core inflation, below 2.0% for 5 years, started to accelerate in 1966, stabilized in the 3.0-3.5% range for about a year, and then took a life of its own reaching 6.6% at the end of 1970. The economy kept growing, profits rose 13% during the period, but P/E multiples deflated to 13x at the June 1970 low when inflation was 6.5% (Rule of 20 P/E of 19.5). If you wish to see if there were any similarities with the present: THE INFLATION DEBATE: JFK, LBJ, JOE AND JAY

The Case for Stablecoins Being the New Shadow Banks

The value of the top four stablecoins has surpassed $100 billion in the space of four years, and the coins — which trade on a blockchain but attempt to maintain a one-for-one peg with fiat currencies — now form an integral part of the crypto ecosystem, often acting as the collateral behind DeFi and enabling transfers between crypto exchanges. (…)

This is the reason why JPMorgan Chase & Co. strategist Josh Younger describes stablecoins as being “the primary interaction point between the crypto-native and traditional financial systems through their reserve funds.” The suggestion is that if stablecoins were to experience disruption, it could reverberate into financial markets through the commercial paper channel, again depending on what issuers hold:

“While there is not much direct linkage between events in cryptocurrency markets and the traditional financial system, reserves backing stablecoins may have some overlap.  As noted previously, disclosures from Tether indicate significant holdings of commercial paper (i.e., 50% of their reserves portfolio or roughly $30bn), presumably denominated in USD.   Assuming no significant changes to these allocations, the rapid growth of USDT would suggest that they could become one of the largest holders of USCP – if indeed that’s what is included in the disclosed holdings.  Furthermore, while other stablecoin issuers have not made the same detailed disclosures, assuming their reserves are similarly allocated, the overall exposure of stablecoins to USCP could be comparable to that of U.S. prime MMFs. But by no means are stablecoin issuers a dominant player in the USCP market. Indeed, while prime funds are easy to identify as active market participants, stablecoin related activity is difficult to spot. (…)

This isn’t a problem as long as the stablecoin market avoids huge bouts of redemptions. So far that has been the case, even in the sharp crypto sell-off in May. That’s somewhat surprising given that — by Younger’s calculations — the top four coins have ‘broken the buck’ (i.e. dipped below their peg) with some regularity; having spent the past 30% to 40% of the past three months trading below par. (…)

• Fed Officials Want Increasingly Risky Stablecoins Regulated

For more on that: THE GRANT WILLIAMS PODCAST: BENNETT TOMLIN & GEORGE NOBLE

Federal Reserve Ramps Up Debate on Taper Timing, Pace Fed officials are set to accelerate deliberations at their meeting next week over how to scale back easy-money policies, amid a stronger economic recovery than they anticipated six months ago.

Fed Chairman Jerome Powell has said their discussions are focusing on two important questions: When to start paring their monthly purchases of $80 billion in Treasury securities and $40 billion in mortgage securities, and how quickly to reduce, or taper, them. (…)

The central bank last December said it would continue the current pace of bond purchases until officials concluded they had achieved “substantial further progress” toward their goals of 2% inflation and robust employment.

“We have not achieved that,” New York Fed President John Williams said July 12.

Because Fed officials have said they would provide ample notice before they start tapering, they look unlikely to initiate any taper at their next two meetings, in July or September.

Instead, if they can agree on a plan this summer, they could provide updated guidance later this summer or at their September meeting on how soon actual reductions might begin. Mr. Powell could also use a speech at the central bank’s annual symposium in Jackson Hole, Wyo., in August to flesh out the latest thinking around emerging plans. That could tee the Fed up to start tapering around year’s end. (…)

One camp that thinks the Fed will need to rai

Economists see continued spending, hiring and limited disruptions as health officials try to avoid restrictions and boost vaccinations

se rates sooner is angling to start the taper as soon as possible. There are good reasons to question “the story that inflation’s going to be temporary and it’s going to get back below the 2% inflation target, which…we won’t know until we get to next spring,” St. Louis Fed President James Bullard said last week. He said he wants to create flexibility “to handle the case where inflation does turn out to be more persistent.”

Another camp thinks recent price pressures will subside and could leave the Fed in the same position it faced for much of the past decade, in which global forces kept inflation below 2% even with historically low interest rates. “I’m still nervous that…it’s going to be tough to meet our inflation objectives,” Charles Evans, president of the Chicago Fed, said last week. (…)

• Delta Variant Isn’t Seen Denting Recovery Economists see continued spending, hiring and limited disruptions as health officials try to avoid restrictions and boost vaccinations

“(…) for now, it seems like the vaccines should be able to keep the spike in cases fairly low.” (…) The uptick [in cases] has touched every state but is primarily occurring in areas with lower vaccination coverage. It hasn’t triggered the widespread closures, layoffs and restrictions on business activity that occurred in the spring of 2020. (…)

Governors and other officials are under pressure to keep their economies open, and vaccinated people could balk at following restrictions intended to keep unvaccinated people safe when Covid-19 vaccines are widely available. (…)

(CalculatedRisk)

Data: CSSE at Johns Hopkins University. (Rhode Island and Iowa data from CDC, July 12-19.) Map: Axios Visuals

PENT-UP OR SPENT-UP?

John Mauldin’s team puts itself in the spent spent-up camp, but for the wrong reasons:

Retail sales, other than essentials like food and fuel, plunged last year but recovered quickly. They leaped higher again in early 2021 before stabilizing near the current higher level. Is this sustainable?

Is there some reason to think consumers will keep spending more than they were in 2019 and early 2020? Probably not. More likely, this represents a catch-up effect. People are now making the purchases they postponed last year. It’s the “pent-up demand” we hear about, and for now it is holding steady. But a return to trend seems likely once this effect recedes.

Pantheon Macro’s chart uses monthly, seasonally adjusted annualized data and can thus suggest that recent strong sales are merely catch-ups from the March-April 2020 decline.

The reality is that March and April sales are typically about 4% less than the 10 other months’ average sales. A more adequate way to measure if recent sales are catch-ups is to use non-seasonally adjusted sales for each month and build a trailing 12-month series which this chart does:

The decline in March-April 2020 goods sales was all made up by February 2021. Sales took off thereafter, right when Covid-19 cases dropped and states began reopening their economies. June 2021 trailing 12-m sales were 15% above February 2020 (+11.3% annualized) and are now actually 9.0% above trend.

China Offers Oil Reserves in Unprecedented Move to Cool Rally

The country will supply about 3 million tons — or 22 million barrels — to major refineries, according to people with knowledge of the matter, who asked not to be identified as the information is sensitive. The decision is the latest in a slew of measures by the world’s second-largest economy to rein in skyrocketing costs caused by a post-pandemic economic recovery. (…)

Since early-2021, Beijing has ramped up efforts to control surging prices that have seeped into everything from the cost of power to daily meals. Raw material costs are up on a strong economic recovery from China to the U.S. to Europe, as well as virus-related labor and supply-chain woes. Beijing has gone after speculators and released state metals and coal stockpiles in a bid to prevent rallying prices from denting its own growth.

These sales, however, have garnered mixed responses from the market. Since announcing the sale of stockpiled base metals including copper, aluminum and zinc on June 16, domestic futures prices have been little changed, or risen slightly. For grains, prices are down about 1.5% after China offered stockpiled corn on July 9.

The department in charge of non-oil commodity stockpiles said Wednesday that it will increase the amount of base metals it will sell by as much as 80%, compared with its previous auction, indicating it hasn’t given up its effort to stop the rally. Goldman Sachs Group Inc. and Citigroup Inc. say China’s actions to control prices will likely fail. (…)

EARNINSG WATCH

We now have 73 reports in, an 88% beat rate and a +16.7% surprise factor.

Trailing EPS are now $177.13. Full year 2021: $192.68e. 2022: $213.56e.

But investors are more interested in the conf. calls.

Bespoke’s compilation shows a huge spike in positive guidance…but it puzzles me to see that this comes with rising cuts as well:

(Bespoke)

In spite of this huge spike in positive guidance, Q3 earnings growth are not up all that much, from +24.7% on July 1 to +26.8% yesterday. The biggest upward revisions are in Health Care and Materials. Most other sectors are up marginally while 3 sectors, Cons. Staples, Real Estate and Utes, are seeing their Q3 growth rates shaved.

• About 87% of S&P 500 companies tracked by Bloomberg have mentioned inflation in conference calls so far in July, including some of those mentioned above.

The following were all cited in the latest earnings note from BofA Securities Inc.’s Savita Subramanian (via John Authers) (my emphasis)

Fastenal Co (Industrials): “Price actions to-date have largely matched cost increases. There’s a ton of inflation going on. There’s inflation because of disruption and shipping” “The marketplace is still receptive to price actions and the tools and processes we have developed have been effective. Even so, given the rate of inflation, maintaining price cost parity will be a bigger challenge in the third quarter.”

Conagra Brands Inc. (Staples):  “We expect the negative impact of the cost inflation to hit our financials before the beneficial impact of our responsive actions, including our pricing. This timing mismatch is expected to be particularly impactful in (fiscal) H1 and, more specifically, in (fiscal) Q1. The resulting pressure on our first half margins impact our full year profit […]” “When we initially gave our fiscal 2022 targets at our Investor Day in April of 2019, our models assumed an annual inflation rate of around 3%. At the time of our third quarter call, in April of 2021, we expected fiscal 2022 inflation to come in at twice that level around 6% […] We now currently expect fiscal 2022 inflation to come in around 9%.”

McCormick & Co Inc. (Staples): “We’re seeing broad-based inflation across our various commodities, packaging materials and transportation costs. To offset rising costs, we are raising prices where appropriate, but usually there is a lag time associated with pricing, particularly with how quickly costs are escalating. And therefore, most of our actions won’t go into effect until late 2021.”

PepsiCo Inc. (Staples):  “We’re seeing inflation in our business across many of our raw ingredients and some of our inputs in labor and freight and everything else. So, we operate in the same context. We feel quite comfortable or confident that through a combination of net revenue management initiatives and increased productivity, we can navigate this.”

Cintas Corp. (Industrials): “While some inflationary pressures increased certain costs, these were more than offset by increased revenue from businesses reopening or increasing capacity as COVID-19 case counts fell and restrictions on businesses were reduced.”

• Bloomberg News also reported this bleak assessment from PPG Industries Inc.: “This inflation cycle is much higher than anyone anticipated and we’re continuing on a business by business basis, working to secure further selling price increases”

Meanwhile, 55 STOXX 600 companies have reported their Q2 results. The beat rate is 55% and the surprise factor on +5.3% with 5 of 9 sectors having reported showing negative surprises. Revenues are only 1.1% above estimates (+4.2% on S&P 500 companies).

Clearly, costs pressures are broad and intense. So far, revenue growth in the 14-16% range helps offset the pressures on margins. But revenue growth is slowing down to +10.0% ex-Energy in Q3 and +6.9% in Q4.

Markit just published a good paper on Suppliers’ Delivery Times, a widely used indicator of supply delays, capacity constraints and price pressures

The suppliers’ delivery times index from IHS Markit’s PMI business surveys captures the extent of supply chain delays in an economy, which in turn acts as a useful barometer of capacity constraints. The index therefore helps gauge the degree to which the current demand/supply environment is indicative of either a buyers’- or sellers’-market, and hence provides valuable information on developing inflation trends.

• The gap between ordering a semiconductor and taking delivery jumped to 19.3 weeks in June, a week and a half longer than in May, according to Susquehanna. The gap was already the longest wait time since they began tracking the data in 2017 and is now more than five weeks longer than the previous peak. (Bloomberg)