Growth on Track…

While the worry warts and shorts keep talking about a recession, the economy keeps kicking out growth. This should mean that average working interest rates will remain in the 3.75 to 3.95 percent range, that is OK.

Here is what Reuters said after the report:

“DOES PMI WARMING TREND = HOTTER INFLATION? (1100 EDT/1500 GMT)

Business activity in the United States is gaining some heat this month.

S&P Global’s advance “flash” purchasing manager indexes (PMI) mid-month temperature takes on the manufacturing and services sectors, both landed above 50, signifying monthly expansion.

The manufacturing PMI (USMPMP=ECI) surprised analysts by crossing over that line, rising 1.2 points to 50.4, while services (USMPSP=ECI) gained 1.1 points to 53.7.

Consensus expectations called for readings of 49 and 51.5, respectively.

Together, they form a composite (USPMCF=ECI) print of 53.5, 1.2 points warmer than March and the highest composite number in 11 months.

While news about economic resiliency is fine and dandy for recession worry-warts, a drill-down into the report shows input and output costs both rose, prompting the steepest jump in operating costs in three months, to “historical levels,” according to S&P Global.

“The latest survey adds to signs that business activity has regained growth momentum after contracting over the seven months to January,” writes Chris Williamson, chief business economist at S&P Global. “However, the upturn in demand has also been accompanied by a rekindling of price pressures. Average prices charged for goods and services rose in April at the sharpest rate since September of last year.”

Below we see composite output and input costs against core CPI:

Financial markets are 88% certain that the Federal Reserve will implement another 25 basis point rate hike at the conclusion of next month’s policy meeting as part of its ongoing battle against inflation, according to the CME’s FedWatch Tool.

But while recent data suggests a gradual inflation cool-down, any upward price pressures are decidedly unwelcome.

Wall Street wobbled in the wake of the report, but was red at last glance.”

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