Econintersect: The Chicago Business Barometer fall back into contraction in May. There was a very sharp contraction for new orders. Authors of this index now suspect there will be no economic bouce in the second quarter.
The market expected the index between 51.0 to 54.0 (consensus 53.1) versus the actual at 46.2. A number below 50 indicates contraction. From Bloomberg:
Chicago's PMI sample reports surprising and inexplicable contraction this month, at an index of 46.2 which is far below the Econoday low estimate for 51.0 and April's reading of 52.3. The index's five components all came in under 50 including very sharp contraction for new orders, production and also employment which is at its lowest level since April 2013. No longer in contraction, however, are raw material prices where higher fuel costs are a likely suspect.
The Chicago Business Barometer fell sharply back into contraction in May, reversing all of April's gain and casting doubt on the strength of the widely expected bounceback in the US economy in the second quarter.
April's positive move had suggested that the first quarter slowdown was transitory and had been impacted by the cold snap and port strikes. May's weakness points to a more fundamental slowdown with the Barometer running only slightly above February's 5½-year low of 45.8. The three month average, although little changed on the month at 48.3, is significantly down from 61.3 in Q4 2014 and barring a sharp rebound in June points to continued sluggish growth in the second quarter. The only positive that can be taken from the May results was that comments from the survey panel suggest weakness was not broad based across all sectors.
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.
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