Every month in the ISM survey, manufacturers are asked whether they are seeing shortages in any commodities, and whether or not the prices for the commodities they buy are going up or down. In last week's report, there were no commodities which were regarded as being in short supply. The last time that occurred was in December 2003:
As far as prices are concerned, manufacturers saw increases in the prices of 17 commodities (Aluminum, Aluminum Extrusions, Aluminum Products, Carbon, Copper, Copper Products, Corrugated Containers, Electronic Components, Flour, Freight, Natural Rubber, Paper, Particle Board, Stainless Steel, Steel, Hot-Rolled Steel, and Sugar). Manufacturers only saw decreases in the prices of two commodities (Caustic Soda and Natural Gas). In the chart below, we have plotted the monthly net number of commodities which have showed increases in prices (this month there were 17 up and two down for a net of 15) versus the Fed Funds rate:
Notice in the chart above how different the current tightening cycle is versus the cycle of 1999-2000. In that period, the Fed raised rates while the number of commodities showing price increases rose, and stopped hiking rates once it was clear that the number of commodities showing price increases had already peaked. In the current period however, the Fed's first rate increase actually didn't occur until after the number of commodities showing price increases had already peaked.