ECONOMICS COMMENTARY — Apr 04, 2024
Global PMI selling price inflation accelerates to ten-month high
Average prices charged for goods and services rose worldwide at a steeper rate for a second consecutive month in March, according to S&P Global PMI business surveys, hinting at historically elevated stickiness of consumer price inflation at the global level in the coming months. Upward price pressures were primarily linked to increased labour costs, and were most evident in the UK and US.
Global prices rise at fastest rate for ten months
Worldwide PMI survey data compiled by S&P Global found average prices charged for goods and services to have risen globally at the fastest rate for ten months in March. The rate of inflation has now accelerated for two successive months, after having cooled to a 39-month low in January.
Although still running well below the highs seen during the pandemic, the upturn in the PMI selling prices index from 53.5 in February to 53.8 in March indicates that inflationary pressures remain elevated by historical standards. By comparison, this index averaged just 51.2 in the decade preceding the pandemic; a time when global consumer price inflation averaged 2.7%. The current PMI readings are consistent with global inflation running close to 4%. Note also that the PMI data tend to lead changes in the annual rate of consumer price inflation by around six months, providing a valuable steer on the likely near-term path of inflation. With this in mind, the suggestion from the PMI is that global inflation looks likely to remain sticky at an elevated level by historical standards as we head into mid-year.
The main area of stubborn price pressure remains the service sector, which reported the steepest price rise for eight months globally in March, the rate of increase running well ahead of the average seen prior to the pandemic.
Manufacturing prices rose for an eighth successive month in March, in a further sign that the disinflationary impact from falling goods prices has faded, but the rate of increase moderated slightly to a pace just below the pre-pandemic ten-year average.
Stubborn wage pressures
Looking at the anecdotal evidence provided by PMI respondents globally, the main reason cited for charging higher prices was the need to pass on higher labour costs amid upward pressure on wages and salaries. These labour cost pressures hit an eight-month high, running at close to four-times the long-run average. However, March also saw some renewed upward pressure on prices from both raw material costs and strengthening demand, the latter adding to firms' pricing power. Energy, in contrast, remained a downward driver of prices on average globally.
UK and US see steepest price hikes
The steepest rates of selling price inflation were recorded in the UK and the US in March, although directions of travel varied. While the rate of increase slowed in the UK, albeit remaining similar to that seen in the prior eight months, the rate accelerated sharply in the US to hit a ten-month high.
The rate of increase also rose especially sharply in Spain. However, selling price inflation cooled across the eurozone as a whole in March to reach a four-month low, helped in particular by a marked slowing in the rate of increase in Germany to the lowest for just over three years and persistent low price pressures in France.
Of the major economies, only mainland China reported falling average selling prices for goods and services, a marginal decline in March offsetting a modest rise in February.
Access the Global Composite PMI press release here.
Chris Williamson, Chief Business Economist, S&P Global Market Intelligence
Tel: +44 207 260 2329
Purchasing Managers' Index™ (PMI®) data are compiled by S&P Global for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.
This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.