Signs point to potential inflation

The current state of the global economy might suggest that inflation will remain weak for the foreseeable future. However, there are signs that pressure is growing on the price of many goods, and this can have implications for investors.

The Institute of Supply Management (ISM) Index is an indicator of economic activity released each month. It is based upon the findings of a survey of purchasing managers based in over 300 manufacturing companies across the United States. The findings are used to compile a report that offers an insight into the mood of the American economy and what this means for business.

The February survey showed that the gauge of prices paid had risen to its highest level since 2011. All of the companies that participated in the survey have raised their prices – the first time this has happened across the board since 1978. This is a sign that inflation is emerging across every area of manufacturing. There are also indications of this happening in other parts of the world. A UK survey showed that the costs of manufacturing had reached a four-year high.

It seems that oil price rises over the past year are now having an impact on manufacturing costs. This leaves manufacturers with a choice – raise their prices or cut profit margins. Rising prices can have implications for interest rates, and might mean that we start to see them rising.

Higher inflation can affect investment choices. If this concerns you, and you’re in Shropshire, this could be a good time to seek wealth management advice.


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