The Kobeissi Letter posted on X. The U.S. manufacturing sector continues its recovery, as indicated by the ISM Manufacturing PMI, which fell by 0.2 points in February to 52.4, marking the second consecutive month of expansion. Despite this growth, new orders decreased by 1.3 points to 55.8, the second-highest level since February 2022. The employment index saw a rise of 0.7 points to 48.8, yet it remained in contraction for the 13th consecutive month.
In contrast, the prices paid index surged by 11.5 points to 70.5, reaching its highest level since June 2022. This increase has sparked concerns about a potential resurgence of inflation. The rise in input costs occurred prior to new tensions in the Middle East, which have significantly restricted oil tanker traffic through the Strait of Hormuz, causing crude oil prices to climb sharply.
If energy prices continue to stay high, manufacturers might be compelled to transfer these costs to retailers and consumers. While the manufacturing recovery persists, the threat of inflation appears to be reemerging.