Econintersect: The Chicago Business Barometer remains in contraction – even though new orders did improve. Authors of this index now suspect the bounceback in economic growth in Q2 may be weaker than expected.
The market expected the index between 48.5 to 55.0 (consensus 50.6) versus the actual at 49.4. A number below 50 indicates contraction.
The Chicago Business Barometer recovered half of May’s loss in June but stayed in contraction for the second consecutive month, with activity weakening further in Q2 from an already depressed Q1.
The Barometer increased 3.2 points to 49.4 in June from 46.2 in May, up from February’s 5½-year low but spending the fourth month below 50 since the start of the year. Despite the modest improvement in June, the Barometer declined to 49.3 in Q2 from 50.5 in the previous quarter, the lowest since Q3 2009, a signal that the bounceback in economic growth in Q2 may be weaker than expected.
The increase in the Barometer between May and June was led by an 8.8% expansion in New Orders to 51.7 in June, pulling the indicator out of contraction. Production contracted at a slower pace, rising 8.7% in June but failing to jump above 50. Despite the rises, both measures remain at relatively low levels.
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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