Chicago PMI confirms mfr’g leading the incipient recovery

Feb Chicago PMI was a better than expected 62.6 up from 61.5 in Jan and vs the consensus of 59.7. It is now at the highest level since Apr ’05 but measures the direction of improvement, not the degree. The components though were mixed. New Orders fell 4.2 pts but still remain above 60 for a 5th straight month at 62.2. Also, inventories fell 6.3 pts to 42.4 but are still the 2nd highest reading since late ’08. Employment fell almost 7 pts to 53 but is above the key 50 level for a 2nd straight month for the 1st time since Aug/Sept ’07. Backlogs rose 4.2 pts to 58.5 to the highest since Dec ’07 and is above 50 for a 3rd month. Prices Paid rose 1.5 pts to 67.7, the most since Sept ’08. Bottom line, the data confirms that mfr’g remains the source of our incipient recovery. While some key components fell from Jan, they jumped from Dec. The Q4 GDP report revealed how much inventories were an influence and today’s # shows that it will continue into Q1.

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