Econintersect: The Chicago Purchasing Managers Index rose 2.5 points, remains in expansion territory, and continues the trend of an improving business sector.
The Chicago Business Barometer increased to 65.5 in May from 63.0 in April, the highest since October, as demand strengthened and the economy continued to recover from a weather related slowdown in Q1.
The market was expecting a value of 59.9 to 64.5 (consensus 61.0) versus the reported value of 65.5. A number below 50 indicates contraction.
The Barometer’s faster expansion was helped by a return to normality following the adverse weather conditions of Q1, with companies playing catch-up to make up for lost output. This was clear from the large spike in Order Backlogs to a three year high, as companies faced a double whammy of strong new demand as well as having to shift existing orders.
Inventories of finished goods rose for the second consecutive month and jumped into expansion after two months in contraction, standing at the highest since November, as firms built stocks in line with planned sales over the summer
Having fallen for three months in a row, Prices Paid experienced the largest monthly gain in nearly five years, fuelled by price increases from suppliers and higher prices for oil-related products and machinery and equipment wholesaling.
Commenting on the MNI Chicago Report, Philip Uglow, Chief Economist at MNI Indicators said, “It looks pretty clear now that the slowdown in Q1 was due to the poor weather, with activity now back to or exceeding the level seen in Q4. The rise in the Barometer to a seven month high in May suggests we’ll see a significant bounceback in GDP growth this quarter following the contraction in Q1. We’ve had false dawns before, but the long run of strength in the survey, coupled with other more positive economic data, suggests growth is becoming more entrenched.”
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