IHS Markit has released its flash U.S. PMI reading for March, and the report cites a strong upturn in private sector output that is supported by the fastest employment growth since May of 2015. That said, the Composite Output Index came in at 54.3 in March.

While this is a growth number, it is lower than the 55.8 reading in February but still above the Bloomberg consensus estimate of 55.2. To add more uncertainty to the matter, it is a two-month low.

The breakdown of the composite for purchasing managers in services and manufacturing was mixed as well. The Services Business Activity Index came down to 54.1 in March from 55.9 in February (also a two-month low). The Manufacturing PMI ticked up to 55.7 in March from 55.3 in February, and that made for a 36-month high. The domestic Manufacturing Output Index was 55.2 in March, versus 55.5 in February. That was a four-month low.

Investors do not usually fret over the Markit flash PMI readings, but what the markets are looking for at this time is any forward views on inflation, employment and growth in general. March’s data showed a further solid payroll gain and elevated price pressures, and there were also positive signals for the near-term growth outlook. New order volumes expanded at a strong pace and payroll numbers picked up to the greatest extent since May 2015.

IHS Markit said of March:

Moreover, business confidence towards growth prospects over the coming 12 months remained among the highest seen over the past three years. … The latest survey signalled another robust increase in average cost burdens across the private sector economy, with the rate of input price inflation unchanged from February’s 52-month peak. In the manufacturing sector, input price pressures were the greatest for six-and-half years. … A combination of sharply rising operating expenses and resilient demand conditions contributed to another marked increase in average prices charged by private sector companies. March data indicated the second-fastest rate of output charge inflation since September 2014.

Chris Williamson, chief business economist at IHS Markit, gave a long quote about the March data. The breakdown on the views is that first-quarter GDP growth would look to be approaching 2.5%, with the caveat that official GDP estimates may once again understate growth as we have seen for the first quarter of each year for some time. It was also said to be indicative of another strong payroll gains of 240,000 in March. Williamson further said:

The improved hiring trend reflects buoyant optimism regarding future growth. Companies’ expectations for output in the year ahead remained elevated, dipping slightly in services but surging to a three-year high in manufacturing. … Inflationary pressures meanwhile remain a key theme of the surveys, especially in manufacturing, reflecting increased raw material prices, notably for metals… The survey found average prices charged for goods and services are rising at one of the strongest rates seen since 2014. Furthermore, with factory costs showing the largest jump for seven years amid growing shortages of key inputs, inflationary pressures appear to be on the rise.

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