Chicago PMI surprises to the upside

The Dec Chicago PMI manufacturing index was a much better than expected 60, 5 pts above forecasts and up from 56.1 in Nov. It’s the highest reading since Jan ’06 but measures the direction of improvement, not the degree. The bright spot was the near 10 pt rise in the Employment component which is back above 50 for the 1st time since Nov ’07 at 51.2. New Orders rose less than 1 pt but remains elevated at 63.5, the most since May ’07. Production, which follows orders, rose more than 8 pts to 65.8 and Backlogs rose 6.5 pts to 53. Inventories improved by 4.5 pts to the highest since Nov ’08. Prices Paid rose 2.3 pts to 54.9, the most since Sept ’08 when it reached 81.4. Bottom line, the number was solid and adds to the story that manufacturing will be the main contributor to Q4 growth. The Chicago region captures auto production and that is a key area of hoped for inventory rebuilds. The ISM on Monday will reconcile the regional surveys.

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