Otto von Bismark, who was no slouch when it came to building a personal fortune after inheriting a debt-ridden handful of estates from an ineffectual father, once said that it was the job of a statesman "to hear God's footsteps marching through history."
We would not pretend to have any special access to the sound of God's footfall, but we do listen closely to the purchasing managers surveys produced each month by the Institute of Supply Management and IHS Markit, which this week appeared to be tapping out a warning about stagflation in the services sector.
Both reports showed that the services sector continued to grow at an impressive pace in June, not surprising as many businesses have just returned to full capacity, and consumers are still flush from the year of lockdowns and stimulus checks.
But the growth was less surprising than analysts expected.
The general sense they gave is that growth has already peaked, earlier than many expected.
The bull case for the economy—that the faster-than-expected growth of the past few months would build momentum and keep growth high through the end of the year—seems much less likely now.
It's also clear from the reports that the snarled supply chains, shortages, and difficulty in hiring employees have not quickly cleared.
Indeed, as Chris Williamson of IHS Markit said in his commentary Tuesday, the "supply constraints are not only stifling growth but also driving prices sharply higher."
Williamson notes that June saw the second steepest ever rise in prices in the 11-year history of the IHS survey. Add to the inflation worries the ever-rising price of oil.
Until the last few days, it was widely expected that the Saudi-led OPEC+ group would aid the global recovery by increasing the supply of oil to tamp down on the price as global demand lifts.
But the United Arab Emirates object to the lower prices, most likely because the emirates can hear the rest of the world openly conspiring to no longer buy any of the stuff that flows beneath their country. It's hard to blame them for wanting one last hurrah of high oil prices following the pandemic.
It might not be God's footsteps they are hearing, but they know that the march of history isn't toward more dependency on Gulf oil. And so oil is likely heading higher through the summer.
– Alex Marlow & John Carney
Breitbart News Network
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