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posted on 29 January 2016

January 2016 Chicago Purchasing Managers Barometer Unexpectedly Jumps Into Expansion

The Chicago Business Barometer which recently has spent more time in contraction than expansion. jumped well into expansion territory. This survey came in well above expectations.

From Bloomberg, the market expected the index between 44.0 to 47.5 (consensus 45.5) versus the actual at 55.5. A number below 50 indicates contraction. Chief Economist of MNI Indicators Philip Uglow said,

While the surge in activity in January marks a positive start to the year, it follows significant weakness in the previous two months, with the latest rise not sufficient to offset the previous falls in output and orders. Previously, surges of such magnitude have not been maintained so we would expect to see some easing in February. Still, even if activity does moderate somewhat next month, the latest increase supports the view that GDP will bounce back in Q1 following the expected slowdown in Q4.

From ISM Chicago:

The Chicago Business Barometer bounced back sharply in January, increasing 12.7 points to 55.6 from 42.9 in December, the highest pace of growth in a year. The latest increase followed extreme weakness in the fourth quarter, with the Barometer averaging 47.7, the weakest quarterly growth since Q3 2009. The three month trend remained depressed at 48.7, up only slightly from 47.7 in December. Four out of the five components of the Barometer increased on the month, led by a 20.2 point surge in New Orders to 58.8, the highest since January 2015. Additionally, Production, the second largest component of the Barometer posted a double digit gain pushing it back well above the 50 neutral level.

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



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