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S&P Global PMI Commodity Price & Supply Indicators
highlighted that manufacturers continued to battle against rising
prices and shortages for a wide range of items in February, with
the fallout from the war in Ukraine set to reverse the recent
improvement in international supply chain conditions.
The number of manufacturers reporting rising energy costs was
the highest since data were first available in January 2005,
sending an early warning that escalating oil and gas prices are set
to unleash another wave of inflationary pressures around the
world.
Reports citing increased energy prices were more than ten times
greater than normal in February (10.6), which compared with 9.5
times greater than normal in January and exceeded the previous peak
of 8.6 recorded in July 2008. Meanwhile, price pressures for
semiconductors were stronger than those seen for any other item
monitored in February, with this index reaching a fresh record high
of 28.3.
Stretched international supply chains meant that reports of
supply shortages by manufacturers around the world remained 5.8
times higher than usual in February, although this was down from a
peak of 9.0 in June 2021. By item, the most acute difficulties were
for Transport, as delays at ports and constrained haulage capacity
meant that shortages were 24.0 times higher than usual.
Semiconductor shortages also remained a key concern for global
manufacturers, with this index reaching a four-month high of
7.4.
S&P Global PMI Commodity Price & Supply Indicators were
devised to provide timely insights into price and supply pressures
for key commodities, services and product groups amid heightened
concerns surrounding rising prices and material shortages. The
indices are derived from the S&P Global monthly Purchasing
Managers' Index™ (PMI) business surveys for the manufacturing
sector, which cover variables such as output, new orders, purchase
prices and suppliers' delivery times, with monthly data collected
from approximately 10,000 companies worldwide.
Index measuring prices paid for energy hits record
high
Inflationary pressures were sustained in February, with the
number of manufacturing firms worldwide reporting higher prices for
raw materials nearly four-and-a-half times higher than normal. A
fresh series record of higher prices was reported for
semiconductors, while reports of rising energy prices were also at
a record high amid surging gas prices. This is in line with S&P
Global Pricing and Purchasing data pointing to a renewed record
increase in the cost of energy (see below).
In the wake of the Russian invasion of Ukraine the cost of
energy became especially volatile, with the benchmark for global
oil prices (Brent) exceeding $130 per barrel at the start of the
conflict. Moreover, given the dependence of European economies on
Russian gas and existing price and supply pressures, reports of
rising energy costs and strained supply are likely to continue
throughout the year.
Strong commodity price inflation and ongoing supply
shortages reported in February
Comparisons of benchmark pricing data against Price Pressure
Indicators derived from Manufacturing PMI surveys indicates that
the latter are a useful bellwether for price trends in commodity
markets.
Looking at the price of aluminium and copper on the London Metal
Exchange, the respective price pressure indices for the materials
are closely correlated with average prices seen over the month.
Pandemic-induced supply shortages ease but remain a
driver of global inflation
As has been the case since the middle of 2021, manufacturers
globally reported severe disruption in electrical components amid
stronger demand. Semiconductor and electrical item shortages have
plagued the global manufacturing sector recovery, with an
unprecedented number of firms reporting the inputs in short supply.
While there were tentative signs of easing pressures at the turn of
the year, the rise in COVID-19 cases related to the Omicron variant
has forced a renewed rise in the number of companies reporting
shortages.
As a result, firms have reported surging price pressures for
these inputs with many companies commenting that shortages have led
to sharp rises in costs. Moreover, price and supply pressures for
semiconductors especially has had a knock-on effect across the
global manufacturing sector and has held back a stronger recovery
in production, with anecdotal evidence for the JPMorgan Global
Manufacturing PMI highlighting material shortages and rising costs
as a hinderance to an accelerated recovery. This is most prevalent
in key sectors such as automotives, as car production has become
increasingly reliant on semiconductor technology.
Price and supply chain outlook
The outlook for global inflationary pressures appears skewed to
the upside due to escalating energy prices and renewed disruptions
to international supply chains. While COVID-19 restrictions have
been lifted across much of the world, supply chain disruption is
expected to continue feeding into purchasing prices, especially
given heightened concerns surrounding supply chains given the
Russia-Ukraine conflict and the prospect of renewed production
stoppages in China due to zero-COVID policies.
The pace at which price and supply pressures return to stability
will be contingent on how quickly logistical disruptions are
resolved and capacity is rebuilt, or in some instances "re-shored"
to help resolve supply and demand imbalances.
Hence, the evolution of our PMI Commodity Price & Supply
Indicators will be a key component in tracking the health of global
supply chains in the wake of new potential disruptions.
The next S&P Global PMI Commodity Price & Supply
Indicators release will be available on Friday 1st April 2022.
About S&P Global PMI Price Pressure
Indicators
When questioned about purchase prices, survey respondents to
S&P Global Manufacturing PMI surveys are also asked to list any
specific items that have increased or decreased in price each
month. These lists are transformed into Price Pressure Indicators
(PPIs), which show the development of price pressures relative to
long-run trends. PPIs are calculated from the number of purchasing
managers reporting a specific item to have risen in price during a
survey month, less the number reporting that item to have fallen in
price. Indices are then presented as a multiple of the long-run
average since January 2005.
The headline index is the "All Items Index", with individual
indices published for the following 25 items and groupings:
Semiconductors, Electrical Items, Oil, Transport, Chemicals,
Polymers, Polyethylene, Polypropylene, PVC, Rubber, Timber, Paper,
Packaging, Food, Textiles, Aluminium, Copper, Iron, Steel,
Stainless Steel, Electricity, Energy, Gas, Cartons and
Polystyrene.
The index is based such that a value of 1.0 indicates that price
pressure is in line with the long-run average. Any figure above 1.0
indicates that price pressures are above the long-run trend, and
the higher the figure the faster the rate of increase relative to
the average. For example, February data for all items had an index
value of 4.3, signalling reports of price increases in February
were almost four and a half times the normal amount.
A value above 0.0 but below 1.0 indicates that price pressure is
below the long-run trend, and the lower the figure the slower the
rate of increase relative to the average. A value of 0.0 means that
prices are stable in the reference month.
As purchasing managers have the opportunity to report items
which are also falling in price, any figure below 0.0 indicates
that reports of price declines exceed those of rising prices, and
the lower the figure, the greater the degree of negative price
pressure. For example, an index value of -3.0 would signal reports
of price declines are three times the normal amount.
About S&P Global PMI Supply Shortage
Indicators
Supply shortage indicators (SSI) are calculated using a similar
methodology to the PPIs. When questioned about suppliers' delivery
times, survey respondents to S&P Global Manufacturing PMI
surveys are also asked to list any specific items that have been in
short supply each month. These are then transformed to SSIs, for
the purpose of showing the development of supply pressures relative
to long-run trends.
Therefore, an index value above 1.0 indicates that supply
shortages are above the long-run average, and the higher the figure
the greater the degree of shortages relative to the trend. For
example, latest data showed that the All Items Index had a value of
5.8 which signalled that reports of supply shortages during
February were close to six times the normal amount.
A figure below 1.0 would thus indicate that supply shortages are
below the long-run trend, and the lower the figure the fewer the
number of shortages relative to the average. The SSIs cannot fall
below zero.
The headline index is the "All Items Index". In addition,
individual indices are published for the following 20 items and
groupings: Semiconductors, Electrical Items, Oil, Transport,
Chemicals, Polymers, Polyethylene, Polypropylene, PVC, Rubber,
Timber, Paper, Packaging, Food, Textiles, Aluminium, Copper, Iron,
Steel and Stainless Steel.
Usamah Bhatti, Economist, S&P Global Market
Intelligence
Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit 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.
At the same time, business costs increased at historically elevated rates, with new record levels of cost inflation… https://t.co/ofDaBfq7KX
May 25
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