DAVY VIEW

Yesterday’s US ISM Services survey at 63.7 in March indicated that the recovery is proceeding at a rapid pace, with activity (69.4) and new orders (67.2) seeing even faster growth. However, demand is rebounding faster than supply capacity. Hence, prices (74.0) saw an enormous rise, blamed on labour and materials shortages, higher shipping costs and supply chain disruption — questioning the Fed’s view that the acceleration in CPI inflation in the coming months will be temporary and rates will stay on hold through 2023.