Inflation Watch: China PPI, Empire Prices, NFIB Survey Inflation Watch: China PPI, Empire Prices, NFIB Survey Inflation Watch: China PPI, Empire Prices, NFIB Survey

Inflation Watch: China PPI, Empire Prices, NFIB Survey

Summary:  Momentum continues to build across a suite of inflationary reads. We run through the latest in global survey data and the read through for inflation.

Although the move higher in long dated yields in the US has stabilised since our last Inflation Watch update there is no shortage in inflationary reads and pricing pressures across various survey data. Eurozone yields have picked up the baton and are pushing higher and as the growth backdrop continues to improve alongside strengthening inflation expectations UST yields will soon follow suit, resuming their march higher toward 2%.

The good news continues to roll in for growth with a slew of positive economic data delivered in recent weeks. Granted favourable base effects are playing their part in the year over year acceleration in the data (and will continue to do so) but on some measures 2019 levels are being surpassed. All told the economic cycle continues to accelerate which remains the driving force propelling equity markets in the near term.

However, once that rate of change turns, focus will likely shift to the impact of rising input costs and widespread price pressures and the prospect taxes hikes – likely a more difficult period to navigate. Remember, everything happens at the second derivative!

China PPI

Rising PPI inflation in China could drive US CPI inflation materially higher and is another indicator of price pressures. Through March the China producer price index rose 4.4% from a year earlier, and 1.6% from the prior month.

Base effects have contributed to this move higher but are not the full story. Increases in prices across almost the entire commodity complex, from copper, coal, and oil, to battery metals and rare earths, is hitting factory gate prices. The impact of increased prices across the commodity complex will continue to flow through to PPI over the coming months, as will base effects continue to contribute to higher PPI reads. As the effect of increased commodity prices continues to flow through to PPI inflation we could see this number heading toward 10% in the coming months.

Source: Bloomberg

An uptick in factory gate prices in China has historically held a close relationship and high positive correlation with US headline CPI. As supply side bottlenecks build, demand picks up and input prices continue to move higher, output prices will likely follow.

Source: Bloomberg, Saxo Capital Markets

NFIB Small Business Survey

According to the survey 34% of firms plan to increase selling prices. The last time this survey read was seen, headline CPI was printing above 5% YoY. It is clear pandemic fatigued consumers with fiscally bolstered incomes and high savings are ready to spend. Confidence is on the up, the labour market recovery is underway and household spending expectations are close to all time highs. Against this backdrop, and with the added impact of rising input costs due to raw materials inflation and supply chain disruptions it is reasonable to expect some pass through to end-user prices.

The NFIB small business survey of job hard to fill has accelerated to an all-time high in March as business report having trouble filling jobs at the fastest pace on record. Small businesses are potentially in competition with enhanced unemployment benefits here, so it is difficult to draw firm conclusions, but it is possible that businesses will have to up the ante in enticing people back to work.

Empire State Manufacturing Survey

Input price increases continued to pick up in March relative to February, rising at the fastest pace in nearly a decade, and selling prices increased significantly.

Source: Bloomberg

US ISM Manufacturing PMI

Continues to indicate momentum in price pressures. The survey's measure of prices paid by manufacturers fell slightly from February to a reading of 85.60, vs. 86.00 in February which was the highest since July 2008. Indicating price pressures remain elevated hovering near levels last seen in 2008. The forward-looking new orders sub-index leapt to 68.0 in March - the highest reading since January 2004.

Against incoming easier comparisons (base effects plunge into heart of pandemic) and Covid-fatigued consumers that are vaccinated and ready to spend, inflation will soon be higher. Transfers have bolstered incomes, the labour market is rebounding, savings are elevated and in the US household spending expectations are high. In addition, consumer confidence is on the up. This increase in demand will quickly meet supply constraints and the base effect cliff. Markets have recognised this shift, but inflation is likely to more than “moderately overshoot” based on our methodologies, which is not sufficiently discounted yet.

New York Fed's Survey of Consumer Expectations

It’s not just investors expecting higher inflation, but consumers too. Consumers' expectations for price inflation are the highest in 7 years. Inflation expectations are what people expect future inflation to be, and to some degree realised inflation is governed by inflation expectations. This as economic agents alter their behaviours today based on the expectation that inflation will be higher (or lower) in the future. The data show consumers clearly see inflation rising materially above 2%.

What is the Fed watching?

Recently Fed Vice Chair Clarida, pointed to a measure of inflation expectations closely watched by the Committee. The measure is the “Estimated index of common inflation expectations” and combines various market and survey measures into a single index of households and businesses expectations for price inflation.


Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (
- Analysis Disclaimer (
- Notification on Non-Independent Investment Research (

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.