Jan Chicago PMI manufacturing index was a better than expected 61.5 vs the consensus of 57.2, is up from 58.7 in Dec and is at the highest level since Nov ’05. The key bright spot was the Employment component which rose to 59.8 from 47.6, to the most since Apr ’05. New Orders rose 2 pts to 66.4 and Backlogs rose 2.3 pts to 54.3. Inventories rose by 10 pts to the highest since Aug ’08 when it was last above 50. Bottom line, the number was solid and provides further evidence of the manufacturing contribution to GDP as inventories get built up again. However, the index measures the direction of improvement, not the degree so don’t extrapolate that businesses are hiring again like its Apr ’05 but we’ll take what we can get for the labor market, particularly in the hard hit manufacturing sector.
The final Jan U of M confidence figure was 74.4, 1.4 pts above estimates, up from the initial Jan release of 72.8 and 72.5 in Dec. It’s now at the highest level since Jan ’08. Both Current Conditions and the Outlook rose from Dec but from the Jan preliminary reading, Current Conditions were unchanged and the Outlook rose by 2.6 pts. One year inflation expectations at 2.8% were unchanged from the initial Jan report but is up from 2.5% in Dec. Five year inflation expectations are at 2.9% vs 2.7% in Dec. Bottom line, typically confidence rises with the outlook for the labor market and the Conference Board confidence figure on Tuesday also showed an improvement in the answers to the labor market questions so while still difficult, the jobs outlook may be improving, however slightly, but improving nonetheless.
