Chicago PMI best since Dec ’07 but market awaits the ISM

The Nov Chicago PMI was a better than expected 56.1 up from 54.2 in Oct and vs the forecast of 53. It’s the highest since Dec ’07 and measures the direction of change, not the degree. New Orders rose to 62.8 from 61.4 to the highest since May ’07 and Backlogs were up 4.6 pts to 46.5. Production, which follows new orders, though fell 6.3 pts. Employment remains well below 50 but did rise 3.6 pts to 41.9, the highest since Sept ’08 (48.8). Inventories rose 2.7 pts but are still very lean at 34.9 and thus still little evidence that the large destocking seen is being followed by restocking. Prices Paid rose 4 pts to the most since Nov ’08. Today’s better # follows also an upside surprise in Oct but the stock market didn’t respond then as it waited for the national ISM report to reconcile the regional surveys. The Chicago PMI though does confirm that manufacturing will be a key part of the hoped for recovery as consumer spending still remains uncertain.

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