US supply chains are mending
Supply chain developments were mixed in October, but the implications for the outlook, particularly for inflation, are modest. The easing of transportation stress helped push our supply-chain stress index lower, and a dip in price pressures helped drive the headline down. Meanwhile, increases in the activity and labor components show the economy retains momentum while inventories rose.
What you will learn:
- While the ISM services prices paid index registered a monthly advance, manufacturing prices fell and the cost of key commodities declined – offering more evidence that goods inflation will slow. Spot rates for ocean and air freight continued to slide, and trucking rates eased.
- The infamous backlog of cargo ships off the Southern California coast looks to be nearing an end, and the impact of lower oceanborne shipping volumes is spreading downstream, with trucking companies seeing muted volumes despite entering the peak shipping season and warehouse vacancy rates creeping higher.
- Jobs growth and wage inflation moderated in October. While an increase in the unemployment rate may be an encouraging sign, we believe the October jobs report, as a whole, increases the risk that the Fed tightens monetary policy more than assumed in our November baseline forecast.
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