Econintersect: The Chicago Purchasing Managers Index fells 3.9 points, but remains in expansion territory. Employment component of the index fell sharply.
The Chicago Business Barometer decreased 3.9 points in March to 55.9, the lowest level since August, led by a decline in New Orders and a sharp fall in Employment.
The market was expecting a value of 57.2 to 60.6 (consensus 59.0) versus the reported value of 55.9. A number below 50 indicates contraction.
Business activity slowed, with the Barometer averaging 58.4 in the first quarter, down from a two and a half year high of 63.3 in the fourth quarter of 2013. It remained well above the 50 level, though, pointing to continued recovery of the US economy in a quarter that was plagued by bad weather which almost certainly had some negative impact on the results.
Although New Orders remained firm above the 50 breakeven level, they eased for the second consecutive month pointing to a slight softening in demand. Like the Barometer, New Orders posted the lowest reading since August. Order Backlogs also decreased, to their lowest level since September.
Employment, the second biggest contributor to the Barometer’s decline, decreased sharply in March, erasing nearly all of February’s double digit rise. The volatility seen in Employment for the past four months likely reflects increased reliance on temporary workers.
Production underpinned the Barometer and rose to the highest since November. It was the strongest component for the first time in nine months. Supplier Deliveries also expanded at a faster rate.
Inventory of finished goods fell sharply into contraction to the lowest since July 2013. Prices Paid also declined for a second consecutive month to the lowest since April 2013. Commenting on the MNI Chicago Report, Philip Uglow, Chief Economist of MNI Indicators said, “March saw a significant weakening in activity following a five month spell of firm growth. It’s too early to tell, though, if this is the start of a sustained slowdown or just a blip.”
“Panellists, though, were optimistic about the future. Asked about the outlook for demand over the next three months, the majority of businesses said they expected to see a pick-up.” 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