- Wealth PMS
As we saw for the manufacturing sector, however, the supply side is struggling to keep pace with the strong momentum in domestic demand, which is manifesting itself in accelerating input prices and is spilling over to prices charged. Moreover, rising food and fuel prices are adding to inflation. The current strong pace of activity is clearly not compatible with comfortable and stable levels of inflation, underscoring the urgency of continued monetary policy tightening and the need to prepare a budget for the next fiscal year, which is consistent with an appropriately contractionary fiscal policy stance.
We’re doing well – anything above 50 is good – and it seems to be getting stronger. PMI hasn’t been much of a leading indicator but it has shown that sustained levels above 50 mean a strong economy. But the concern now is that this is demand driven inflation (rather than a lack of supply) and as input prices increase, manufactured goods, typically benign, will start to participate in inflation. Leading to more chaos.
But have no illusions – this is a really strong, bullish report.