Wall Street Journal writer James Freeman sees "Another Inflation Warning" in a Philadelphia Fed survey of manufacturing executives.
https://www.wsj.com/articles/another-inflation-warning-11621536710
"The Philadelphia Fed reports," he writes, that "Price increases were more widespread this month for the firms’ inputs and own goods. The prices paid diffusion index increased 8 points to 76.8, its highest reading since March 1980. Nearly 77 percent of the firms reported increases in input prices, while none reported decreases. The current prices received index increased 7 points to 41.0, its highest reading since May 1981. Any comparison to 1980, when consumer price inflation was hitting its ghastly double-digit peak, is not reassuring."
Any comparison of manufacturers' price diffusion indexes with 1980 consumer price may not sound reassuring, but it also not relevant. If 61% of sampled firms received higher prices while 20% received lower prices, the diffusion index would be 41. Does that predict future inflation in the CPI? Of course not. It mainly reflects reopening of the economy.
All year-to-year comparisons of recent prices with those of April or May of 2020 (including the April CPI) show a big spike for the obvious reason that many prices fell during the worst of the COVID-19 lockdowns. These diffusion indexes of manufacturers prices paid and received were below zero a year ago. It was like a huge going-out-of-business sale. We could not have had a V-Shaped recovery without a V-Shaped reversal of the painful deflation 12 months ago.
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