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Data: Investing.com; Chart: Dion Rabouin/Axios Visuals

While the overall ISM manufacturing index fell in April after a big jump in March and missed expectations, the prices paid index increased again, touching a fresh 13-year high.

What it means: Prices continue to rise for businesses as supply chain disruptions have been unrelenting and commodities prices march steadily upward. But the positive sentiment for businesses that has accompanied those price hikes could be fading.

By the numbers: The headline ISM manufacturing reading was 60.7, a disappointment compared to expectations of 65.0 by economists, which would have been a continuation from March's strong 64.7 reading.

  • The prices paid index rang in at 89.6, suggesting the overwhelming majority of businesses surveyed are seeing price hikes.
  • New orders unexpectedly slipped to 64.3 versus the expected 69.5 and a reading of 68.0 in the prior month.
  • The index's backlog of orders reading was the highest on record at 68.2.
  • Employment declined to 55.1 from 59.6 in March.

What they're saying: "Combined with slower supplier delivery times and manufacturer inventory drawdown in April, these indicators suggest supply chain issues are contributing to a pullback in activity for large manufacturers," Lewis Alexander, U.S. chief economist at Nomura, says in a note to clients.

Watch this space: "Overall, the takeaway was one of being underwhelmed by the data — although it is important to keep in mind the >50 readings across the board are constructive," Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets, says in a note.

  • Lyngen also notes that construction spending for March came in meaningfully below expectations at 0.2% month over month.
  • Construction spending was expected to rise by 1.6% month over month as housing prices have soared and after an unexpected -0.6% print in February that was largely blamed on the weather.

But, but, but: Alexander cautions that the report "is likely a reminder that supply constraints matter for how quickly the economy can rebound post-COVID, but are not necessarily a cause for concern with respect to the overall direction of economic activity."

Go deeper

Kate Marino, author of Markets
Jul 30, 2021 - Economy & Business

Key inflation measure grew slower than expected in June

Data: Bureau of Economic Analysis; Chart: Axios Visuals

The price of goods and services rose 0.4% in June, slower than the 0.5% growth during May, according to the core personal consumption expenditures (PCE) price index released Friday morning. The June reading was lower than the consensus expectation for 0.6% growth.

Why it matters: The core PCE is the inflation measure the Federal Reserve watches most closely. June's reading is the second month in a row of decelerated price growth, giving the Fed breathing room to design a pullback strategy from its emergency market support.

The silver lining in the "disappointing" GDP report

Date: Bureau of Economic Analysis; Chart: Axios Visuals

U.S. GDP grew at a 6.5% annualized rate during the second quarter, a pace that fell short of some economists' expectations. But a closer look at the numbers suggests the report was far from disappointing.

Why it matters: If the shortfall in GDP growth were due to a shortfall in demand, then there would be concerns the economy could be peaking.

Perfect storm brewing for extreme politicians

Data: Axios research; Table: Jacque Schrag/Axios

Redistricting and a flood of departing incumbents are paving the way for more extreme candidates in this year's midterm elections.

Driving the news: At least 19 House districts in 12 states are primed to attract such candidates — hard partisans running in strongly partisan districts — according to an Axios analysis of districts as measured by the Cook Political Report's Partisan Voter Index (PVI).

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