UpTrajectory Review
The headline tells us little; the text tells us nothing. We have only a headline from Seeking Alpha: 'Global PMI: Inflation Stays High with Increased Service Demand.' The publication likely reports on the latest S&P Global PMI surveys, which track purchasing managers' activity across manufacturing and services in major economies. The headline suggests services activity is expanding while input costs and output prices remain elevated, a combination that complicates the path for central banks. Without the article body, we cannot cite specific figures, but the pattern itself is well documented in recent months: manufacturing has stagnated while services has driven growth, and wage pressures in labor-intensive service sectors have kept inflation sticky above the two percent targets that the Federal Reserve, the European Central Bank, and the Bank of Japan still pursue.
For a small-business operator, this is not an abstract macroeconomic debate. If you run a restaurant, a repair shop, a salon, or a logistics firm, you live in the service economy. You already know that demand has held up better than the pessimists predicted. You also know that your costs have not fallen the way goods inflation has. Wages, insurance, rent, and energy remain high. The PMI data, if the headline reads correctly, confirms your experience: customers are still spending on services, but your margin squeeze persists because you cannot raise prices as fast as your costs climb without losing volume.
What is genuinely new here is the persistence, not the direction. Markets have spent two years waiting for services inflation to follow goods inflation lower. It has not. The stickiness suggests that the last mile of disinflation will be the hardest. We are skeptical of any claim that rate cuts are imminent or that the inflation fight is won. Central bankers have said repeatedly that they need confidence inflation is moving sustainably toward target. High services PMI readings with elevated price components do not provide that confidence. The risk of higher-for-longer rates, or even another hike if energy prices spike again, remains real.
The second-order effects cut unevenly. Businesses with pricing power, think specialized contractors or healthcare providers, can pass costs through and may even benefit from nominal revenue growth. Businesses without it, especially those locked into fixed-price contracts or facing price-sensitive customers, will absorb the margin hit. Higher rates for longer also mean tighter credit conditions for small firms that rely on floating-rate loans or lines of credit. Commercial real estate borrowers face refinancing cliffs. Meanwhile, consumers who shifted spending from goods to services during the pandemic may start pulling back if wage growth slows while service prices stay high, creating a stagflationary squeeze for Main Street.
Watch the next PMI releases for the price components, not just the headline activity index. If input costs accelerate again, the rate-cut narrative will push further out. In the meantime, audit your own pricing power now. Test a modest increase on your least price-sensitive offering. Renegotiate supplier contracts before your renewal date. If you carry variable-rate debt, model your cash flow at rates one percentage point higher than today's level. The macro data will not rescue you; your own unit economics will.
Takeaway: Sticky services inflation means higher rates for longer; test your pricing power and stress-test your debt costs now.