Chicago Purchasing Managers Continue to See 21st Century High Business Conditions

Econintersect:  The Chicago Purchasing Managers are continuing to see business conditions in January 2011 better than any point in the 21st century.  The index improved to its highest level since July 1988, indicating expansion for a sixteenth consecutive month.

Economically, this report has little significance as it does not correlate to industrial production, GDP,  the Chicago Fed National Activity Index (CFNAI) or any other indicator.

According to the report:

BUSINESS ACTIVITY:

• PRICES PAID indicated increased inflation, increasing to the highest level since July 2008;
• EMPLOYMENT strengthened to a height not seen since May 1984;
• NEW ORDERS increased to the highest point since December 1983;
• PRODUCTION improved with NEW ORDERS to the strongest level since 2004;

BUYING POLICY:

• Lead times reported for MRO SUPPLIES plummeted.

Econintersect pays attention to new orders and backlog in surveys.

There is no indication looking at the unadjusted new orders that the economy is expanding.  The overall health of business correlates well to backlog – falling backlog indicates over-capacity to sales.  Again, backlog is stable.

Random comments from the survey:

1. ―Lots of commodities price rising – steel, tin, aluminum, paper. Has not impacted sales though – have had large increase in orders.‖
2. ―Commodity inflation hurting profits, no pricing power with our customers.‖
3. ―Prices seem to be heating up, many suppliers are knocking on the door right now.‖
4. ―Some suppliers are holding prices to remain competitive, but others who have little to no competition in their sector are talking some significant increases in 2011. We are negotiating to keep those increases to a minimum.‖
5. ―Steel prices are going crazy‖
6. ―Business has increased mostly overseas higher prices, especially copper will kill us figure our cost has increased 40% same as oil too many speculators buying‖
7. ―Unfortunately the magic allure of a new year has not brought about improved service and pricing. Suppliers are continuing with pressures of increased pricing, decreased service levels and extended lead times.‖
8. ―Local foreclosures continue unabated. Small to medium sized business lending picking up slightly but remains very competitive due to lack of credit-worthiness of many of those businesses.‖
9. ―Business continues to improve. We have concerns about available experienced personnel to hire as well as pressures on capacity.‖
10. ―Business remains steady, orders are firm from month to month, back log remains solid…‖
11. ―Orders continue to come in spurts. No orders for 3 or 4 weeks then 3 or 4 in 1 week. The important thing is that the backlog is growing. The quote action is continuing strong.‖
12. ―The company for which I work overall revenues has increased by 34%. We are sheet metal fabrication job shop, customers are predominantly OEM Equipment manufacturers and Packaging.‖
13. ―Very good start to 2011

source: Kingbiz