Chicago PMI solid but need to see ISM

Sept Chicago PMI was much better than expected at 60.4 vs the forecast of 55.5 and up from 56.7 in Aug and 62.3 in July. The internals however were mixed. New Orders rose 6.4 pts to 61.4 but just puts it back in line with the 6 month avg of 61.3. Production, which follow new orders, rose almost 7 pts. On the softer side, Backlogs fell 7 pts to 49.1, below 50 for the 1st time since Nov ’09 and the Employment component fell by 2.1 pts to 53.4, the lowest since May. Prices Paid fell 2.2 pts to the lowest since Nov ’09 which is unusual considering the rise in commodity prices. Inventories rose 3 pts but remain lean at 49.5, about in line with the 6 month avg. Bottom line, the solid headline reading today is encouraging but is in contrast to the weaker than expected NY, Philly, Richmond, Dallas and Milwaukee Fed surveys seen this month and is why tomorrow’s ISM is so key as it will reconcile all the regional surveys.

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