Econintersect: The Chicago Purchasing Managers Index again declined marginally, but remains firmly in expansion territory. Employment component of the index is now in contraction.
Declines in Employment and Supplier Deliveries led the Barometer lower, with Employment slipping into contraction for the first time in nine months.
The market was expecting a value of 57.0 to 58.0 versus the reported value of 59.6. A number below 50 indicates contraction.
The Chicago Business Barometer softened to 59.6 in January from a revised 60.8 in December, the third consecutive monthly fall following October’s jump to the highest since March 2011. In spite of January’s slower rate of expansion, the Barometer remained firm and consistent with the recent pick-up in GDP.
Production, New Orders and Order Backlogs increased slightly, having fallen for the past two months.
The Employment component fell sharply for the second consecutive month to the lowest since April 2013. The majority of companies said their workforce was unchanged with some of them reporting higher productivity of their employees.
Prices Paid rose to the highest level in more than a year as suppliers continued to request price increases.
Commenting on the MNI Chicago Report, Philip Uglow, Chief Economist at MNI Indicators said, “Business activity continued to ease in January but remained at a relatively high level. Production and New Orders remained firm, and while Employment fell back into contraction, this doesn‘t appear to be indicative of current demand conditions.”
“There have been concerns that putting the brakes on monetary easing could damage business. Most respondents, though, thought that the Federal Reserve’s decision to begin tapering their bond purchases in December would not have a significant impact on their business”, he added.
The Chicago ISM is important as it is a window into the national ISM reports which will be issued shortly. When you compare the graph below of the ISM Manufacturing Index against the Chicago PMI (graph above) - there is a general correlation in trends, but not necessarily correlation in values.
source and read the full report: Chicago PMI