Inflation has cooled from 2024 highs, job growth has stayed intact, and consumer spending has remained resilient, but the economy is now facing renewed inflation pressure alongside weakening growth. Manufacturing input costs rose sharply in May, with the input prices index reaching 80.0, the highest level since mid-2022, and showing the largest monthly increase since June 2022. The index has climbed 22 points since February, resembling the pace of the 2021–2022 inflation surge. The pressure is linked to disruptions in energy markets from escalating conflict with Iran, including higher oil prices and increased transportation and insurance costs for refiners. Energy costs flow into many consumer and business purchases, and businesses are passing higher costs to consumers.
"The latest blow came from the May Manufacturing PMI report, which showed the input prices index surged to 80.0 - its highest level since mid-2022. According to S&P Global, that marked the largest monthly increase in manufacturing input costs since June 2022. Even more concerning, the index has now climbed 22 points since February. That pace mirrors the inflation spike seen during the 2021-2022 inflation crisis when the Consumer Price Index peaked above 9%."
"The culprit is becoming increasingly obvious. Trump's Iran war disrupted energy markets at the exact moment supply chains were beginning to stabilize. Oil prices climbed sharply as shipping risks across the Strait of Hormuz increased, while refiners faced higher transportation and insurance costs. That matters because energy is embedded in nearly everything consumers buy - groceries, airline tickets, construction materials, and manufactured goods. Businesses are now passing those higher costs directly to consumers."
"Earlier this year, consumers were already showing signs of fatigue. Credit card balances hit record levels above $1.3 trillion, according to the Federal Reser"
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