May Service PMI: Imput Costs are rising

Today we had another strong reading for the Service PMI in the US. Please look at the chart below

The big concern on the data of today is coming from the Input Costs which are rising considerably during the last months. Input cost inflation accelerated the fastest since October 2013. Some of these increases have been influenced by the rise of some commodities, Steel in particular as a results of Import Tariffs.

The Table below show the main contributors of the PMI; of particular interest is the 2.5% increase on the "PRICES".

We have to monitor the evolution of the Input Costs because sooner or later they may translate either on Inflation or less Profit for Companies.

Said that, it looks like the Economy is in good health and many institutions are projecting a Q2 GDP at around 3.5%.

The chart below track the evolution of the PMI and GDP which are often very correlated.