“Private sector companies across the U.S. signaled a further strong upturn in business activity during August, however, the pace of growth slowed to an eight-month low. Capacity pressures, material shortages and the spread of the Delta variant reportedly weighed on the output expansion.”

“Material shortages, difficulties hiring new staff and the spread of the Delta variant were all highlighted as factors driving a steep accumulation of backlogs of work during August. The strong rise in outstanding business was only slightly below July’s record high, and coincided with only a marginal upturn in employment. Staffing numbers rose at the slowest rate since July 2020, often linked to difficulties finding staff.

Despite concerns regarding the spread of the virus and the longevity of supply chain disruptions, U.S. companies remained upbeat regarding the outlook for output over the coming year. The degree of confidence ticked up from that seen in July.”

Those three paragraphs pretty much capture the gist of the reports.

Here’s the featured commentary from IHS Markit’s Chief Economist:

“The expansion slowed sharply again in August as the spread of the Delta variant led to a weakening of demand growth, especially for consumer-facing services, and further frustrated firms’ efforts to meet existing sales.

“Not only have supply chain delays hit a new survey record high, but the August survey saw increasing frustrations in relation to hiring. Jobs growth waned to the lowest since July of last year as companies either failed to find suitable staff or existing workers switched jobs.

“Prices charged for goods and services grew at an increased rate as demand once again ran ahead of supply, most notably in the manufacturing sector.

“Prices look set to continue to rise sharply due to the persistent upward pressure on costs arising from shortages of materials and labor, though if demand continues to cool due to rising case numbers this should alleviate some of the inflationary pressures.”

Bottom line: While the delta variant is indeed impacting business and contributing to epic supply constraints, all in all, it’s pretty much the bottom line we should expect given the utterly extreme degree government (not at all saying help wasn’t needed, however…….) has stepped into the business of businesses. I.e., distortions galore and what virtually has to be a gross misallocation of scarce resources. 

Asian equities rallied overnight, with all but 1 of the 16 markets we track closing higher.

Europe’s leaning green as well this morning, will all but 3 of the bourses we follow trading up as I type.

U.S. equities are higher to start the session: Dow up 61 points (0.17%), SP500 up 0.19%, SP500 Equal Weight up 0.28%, Nasdaq 100 up 0.25%, Nasdaq Comp up 0.38%, Russell 2000 up 0.45%. 

The VIX (SP500 volatility) sits at 17.21, up 0.35%.

Oil futures are up 2.07%, gold’s flat, silver’s up 0.79%, copper futures are up 0.96% and the ag complex is u 0.95%.

The 10-year treasury is down (yield up) and the dollar is up 0.05%.

Led by oil services stocks, uranium miners, base metals miners, MP (rare earth miner) and financial stocks — but dragged by ALB (lithium miner), utilities stocks, consumer staples stocks, AMD (chip maker) and healthcare stocks — our core portfolio is up 0.58% to start the day.

Quoting my own cynical self this morning:

“We’re at the mercy of a few very bright, academically gifted appointees who’ve proven to be most adept at test-taking and, alas, mess-making.”

I.e., the highest-level economic decisions are too often made by those with the least business experience and, alas, the absolute worst incentives!