Input costs are increasing, and the data may be telling us something important about the road ahead for inflation.
The ISM Prices Paid index last month jumped 11.5 pts to 70.5, the fastest single-month jump since 2022. That alone would warrant attention. But this reading was collected before the strikes on Iran, which have since halted tanker traffic through the Strait of Hormuz and pushed oil prices sharply higher.
As a result, risk is now compounding from multiple directions.
Energy: If elevated oil prices persist, manufacturers face a difficult choice to absorb the hit or pass it through to customers and consumers.
Commodities: Producer prices for unprocessed goods – excluding food & energy – rose more than 15% year-over-year in January, the steepest since April 2022. Metals prices have also climbed sharply.
Tariffs: ISM flagged widespread supplier price hikes, active sourcing restructuring, and pressure to shift toward domestic supply chains. U.S. steel and aluminum prices are now the highest globally.
Supply chains: Supplier delivery times hit their highest since May, and order backlogs rose 5 points to levels last seen in May 2022.
With energy, metals, tariffs, and geopolitical disruption introducing new potential for inflation, this is becoming a challenge for the Fed.
