US S&P Global Composite PMI Flash (Oct) 57.6 (Prev. 58.4)

• “October’s flash PMI data indicate that the US economy continues to boom at the start of the fourth quarter. The output readings from the survey are consistent with GDP growing at a 5% annualized rate after a 4% expansion was signalled for the third quarter. Especially healthy corporate earnings and profits are also indicated, and hiring has surged as companies seek to boost capacity to fulfil stronger customer demand.
• “However, cost pressures remain a key concern, notably as the renewed surge in oil prices reverberates through to impact a wide variety of goods and services. Supply chain bottlenecks have meanwhile intensified, and order book backlogs are growing, making it easier for companies to pass higher costs on to customers. The result is the sharpest increase in selling prices for over four years to a pace that indicates consumer price inflation is likely to rise further above the Fed’s target in the coming months.”

A modest pullback in the flash composite, but at this altitude the index remains deep in expansion territory, and in past episodes of this kind the market read has hinged less on the headline direction than on the composition beneath it. The detail here carries the usual tension of a strong-output, strong-prices print: output and hiring subindices consistent with brisk growth alongside the sharpest selling-price increases the survey has recorded in several years, with the compiler explicitly linking the price component to consumer inflation running further above target. Historically that combination has been a front-end story rather than a growth story, steepening the near-term policy path even as the headline activity reading argues the other way, and the selling-price and supplier-deliveries components have tended to be the parts of this release that travel into rate pricing. Flash PMIs of this kind are also routinely revised at the final print, and large divergences between this survey and the ISM have been common, so the initial reaction has often faded where the two series disagree. The follow-ons are the final PMI revision, the ISM counterpart, and whether the price components corroborate or soften in the next round of hard inflation data. The note that backlogs are growing and cost pass-through is easy is the part of the text that, in comparable episodes, has kept the hawkish read alive longest.