ISM manufacturing survey is the latest sign of disinflation

In early 2023, signs of slowing inflation abound.

Why it matters: Inflation is the most important issue facing investors, as it will determine what the Fed does to interest rates, which will in turn drive stock and bond prices.

What's new: A December reading on the U.S. manufacturing sector showed factory activity slowing down — and importantly, the prices that producers paid their suppliers fell broadly.

• The survey's reading on prices paid fell to its lowest level since the COVID crisis struck, suggesting a strong downdraft in the cost of industrial ingredients.

State of play: The ISM figures were just the latest in a string of numbers that show a pronounced easing of the inflationary forces that hammered markets in 2022. (See natural gas for example.)

• Yes, but: More data is required to confirm early inklings that price increases are leveling. (Sometimes data can get squirrelly at year-end and send false signals.)

The bottom line: These indicators are encouraging, but what really matters is when the Fed thinks the inflationary threat has been beaten back conclusively.

• The latest minutes from the Fed's meeting last month — published Wednesday — suggest officials want a lot more evidence before declaring victory.