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.


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research 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. To the extent that any content is construed as investment research, you must note and accept that the 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 under relevant laws.

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

Saxo Bank (Schweiz) AG
The Circle 38

Contact Saxo

Select region


All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law.

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.