J.P. Morgan: Price components of business surveys have moved meaningfully higher
J.P. Morgan: Price components of business surveys have moved meaningfully higher
Governments have spent huge sums over the past year to help shelter their economies from the pandemic. Key to their ability to do this has been central banks keeping borrowing costs low without fear of rising inflation. Yet now, the latest PMI data shows manufacturing input prices have increased sharply in response to supply side disruption.
Global exports have fallen and supply delays are close to 15-year highs, putting upward pressure on prices. The key question for investors is whether this is likely to be a short-term bump or the start of more sustained inflationary pressure. With investors considering the possibility of rising inflation there have been strong industry flows into US Treasury Inflation-Protected Security funds year-to-date. The major risk for equity markets is that central bank support is unexpectedly removed as a result of rising inflation, which could see yields rise and lofty equity valuations come under pressure.
Index level
Source ISM, Markit, Refinitiv Datastream, J.P. Morgan Asset Management. Data as of 5 February 2021.