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posted on 31 May 2016

May 2016 Chicago Purchasing Managers Barometer Now In Contraction.

The Chicago Business Barometer which recently has spent more time in contraction than expansion returned to contraction. This survey came in below expectations.

From Bloomberg, the market expected the index between 49.0 to 52.2 (consensus 50.7) versus the actual at 49.3. A number below 50 indicates contraction. Chief Economist of MNI Indicators Philip Uglow said,

While expectations are that growth in the US economy will bounce back in Q2, the evidence from the MNI Chicago Report shows activity weakening from an already low level. Firms ran down stocks at the fastest pace for more than 6 years in May, and while a rebuilding over the coming months could support output, the underlying message appears to be that businesses are not confident about the outlook for growth.

From ISM Chicago:

The MNI Chicago Business Barometer fell 1.1 points to 49.3 in May from 50.4 in April, the lowest level since February and the sixth time it has been in contraction over the past 12 months.

Following the decline in April, the latest results show activity stumbling in the second quarter, following only moderate growth in Q1. Barring a solid revival in June, Q2 could be the weakest outturn since Q4 2015 given the April-May average of just 49.9.

The Barometer's decline was led by a 6.6 point fall in Production and was accompanied by a mild setback in New Orders, with both falling below 50. While these were the only components that fell between April and May, out of the five components which make up the Barometer, four of them were in contraction. Only Supplier Deliveries was above 50.

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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