The Big Inflation Warning Hidden In This Morning's Philly Fed Release

Today’s Philly Fed survey data missed expectations and was a steep drop from last month’s eventually revised down heights.

But what is most worrying in this release is the sharp increase in survey responders expecting to pay more for inputs in the future.

From the Philly Fed (emphasis ours):

Price increases for inputs as well as firms’ own manufactured goods are more wide‐ spread this month. 50‐four per cent of the firms reported higher prices for inputs, compared with 52 per cent in the previous month. The prices paid index, which increased 6 points in January, has increased 42 points over the past four months. On balance, firms also reported a rise in prices for manufactured goods: More firms reported increases in prices (26 per cent) than reported decreases (9 per cent), and the prices received index increased 8 points, its second consecutive positive reading.

That increase over the last four months means that, yes, if Bernanke and the Fed are trying to create inflation it is working. But if businesses can’t pass on those increasing prices to consumers, they may have a problem.

Also worrying, firms still don’t think there is demand in the market for their goods, so they are not hiring.


Photo: Philly Fed

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