ISM Prices Paid exploded higher in Dec., beating ests. by a mile. 10 Year Yield Futures explode to 4.7%. S&P 500 forward earnings yield vs. 10-year Treasury hits 23-year low.

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In a December that’s already set to close one of the wildest years on record, the ISM Prices Paid Index just blew the doors off expectations. This isn’t just a bump; it’s an explosion, signaling that inflation might not be cooling down as fast as some hoped. The index, which measures the prices companies pay for goods, jumped higher than anticipated, catching many analysts off guard.

 

Here’s how it breaks down:

 

  • Index Surge: The ISM Prices Paid Index surged to 77.4, far exceeding the consensus estimate of around 60.5. This marks one of the highest readings since the early 2000s, indicating that businesses are facing significantly higher costs for their inputs.
  • Economic Implications: With such a dramatic increase, this could mean that the cost of goods at the consumer level won’t be dropping any time soon. It’s a stark reminder that inflation might be more entrenched than previously thought, affecting everything from everyday groceries to high-tech manufacturing.
  • Sector Breakdown: The manufacturing sector, in particular, has felt the brunt of this price hike. Raw materials, especially metals and chemicals, have seen price spikes, which could lead to higher vehicle and electronics prices down the line.
  • Historical Context: The last time we saw numbers like this, it was during periods of significant economic upheaval, where supply chain disruptions were rampant, and demand outstripped supply by a wide margin.
  • Comparative Data: Compared to November’s index of 65.4, December’s leap is not just a step but a giant leap. This jump, when viewed against the backdrop of the Federal Reserve’s efforts to curb inflation, paints a picture of a more stubborn inflationary environment.
  • Quotes from the Report: The Institute for Supply Management (ISM) stated, “The Prices Index increased 12 percentage points compared to the November reading of 65.4 percent, indicating significantly faster supplier pricing growth.”
  • Market Reaction: Following the release, markets have begun to adjust expectations for interest rates, with some now betting on a tighter policy for longer to combat the rising tide of inflation.

This data isn’t just a blip on the radar; it’s a storm warning for an economy trying to find its footing. With prices paid by businesses skyrocketing, there’s a real risk that the cost of living could soar, putting pressure on wages and consumer spending power. It’s a clear sign that the battle against inflation is far from over, and the strategies employed so far might need reevaluation.

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