The Chicago Business Barometer increased by 1.6 points to 54.2 in May from 52.6 in April.
Analyst Opinion of Chicago PMI
The Fed manufacturing surveys were little changed this month – and Chicago ISM also was little changed.
Expectations this month from Econoday were 52.0 to 55.0 (consensus 53.7) with the actual at 54.2. A number below 50 indicates contraction.
Shaily Mittal, Senior Economist at MNI Indicators said:
This was the second increase in business sentiment this year, with firms having longer order books and thereby raising production. However, they kept employment close to the neutral level amid a lack of adequate skills and volatility in demand. There is no getting away from the general softness in the data. Indicators are significantly below their last year averages but are moving towards their long-term means, implying that if business conditions are not as bright as they were, they are not bad either.
Despite the pick-up in sentiment, the survey points to softness in business activity, as indicated by the three-month average slipping to a two-year low. Furthermore, it is evident that business confidence in Q2 is going to be significantly weaker than Q1, which already was at sluggish levels. The rise in business confidence was led by Production and New Orders. New Orders increased for the first time in three months, but the increase was not large enough to offset last month’s fall. Production picked-up to match its three-month average but was significantly below its 12-month average. Order Backlogs slipped into contraction again, the second such instance this year. Backlogs against other sub-components have contracted the most over the past year, giving further evidence of lukewarm demand. Firms began accumulating inventories following three months of draw-down. Since the 2009 crisis, firms on average have kept inventories balanced and survey evidence shows things getting back to “normal” after a strong 2018 in terms of demand and confidence.
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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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source and read the full report: Chicago PMI
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