In each month’s ISM Manufacturing and Non Manufacturing reports, respondents are asked which commodities have been rising and falling in price. Over time, we have found that tracking the number of commodities has helped to anticipate inflection points in the overall CPI. In this month’s ISM Manufacturing report released on 5/1, respondents saw price increases in just one commodity and declines in eleven for a net of negative ten. On a net basis, that was slightly more commodities down in price than up in price relative to March, but right in the range of readings over the last few months. In the Services sector, the number of commodities rising and falling in price was even at eight, which was also down slightly from March’s readings. On a combined basis, there were ten more commodities that fell in price (19) than commodities rising in price (9).
The chart below compares the combined net number of commodities rising in price on a three-month moving average basis to the year/year change in the CPI. As shown in the chart, the three-month moving average of this reading has increased from a low of -20 in February to -12.67 in April. At the same time, the decline in the y/y change in CPI has flat-lined at -0.1%. The last time the three-month moving average was as low as it is now was during the Financial Crisis in early 2009, and when it finally rebounded it preceded the rebound in the CPI by about six months. That would imply an acceleration in the CPI as we head into the late summer months.