We monitor core production costs that can eventually bleed into consumer prices: (1) Global Supply Chains - the cost of moving goods around the world, (2) Wages vs productivity - how much more companies are paying workers relative to output, and (3) industrial capacity - how hot factories are running When those systems get stressed, prices go up.
CURRENT READINGS
Wage growth in the US is elevated. Falling hourly wage growth is fully explained by the recent increase in hours worked with no expected income on inflation trends.
Deep Sea freight costs are currently high, in the top range of 10-year observations and fast gains in transportation costs are pointing out to supply chain tensions, hinting at inflation pressures.Air freight costs are elevated: very fast gains in air transportation costs are pointing out to supply chain disruptions: expect mounting inflation pressures!
Finally, at 76.17%, US industrial capacity utilization is is limited but growing, and remains below the historical limit that anticipates emerging inflation pressures.
MARKET IMPLICATIONS
Taking all this together, production activities offer mixed views with some cost-push pressures that could marginally contribute to rising prices.
Remember, inflation is a three-headed beast. It's driven by demand-pull (too much money chasing too few goods), cost-push (what we’re tracking right here), and market expectations. Keeping an eye on all three is how you stay ahead of the curve.