Chicago PMI moderates from still high levels
Following a better than expected April NY mfr’g survey and weaker than forecasted Philly, Richmond and Dallas mfr’g indices, the Chicago PMI at 67.6 was a touch below estimates of 68.2, down from 70.6 in Mar and the lowest since Dec but still is at a high level. New Orders led the decline as it fell from 74.5 to 66.3 and Backlogs were down 7.2 pts to 62.4. Employment fell almost 2 pts to 63.7 and Prices Paid moderated slightly to 81.8 from 83.4. Inventories fell 7 pts to 53.5. Bottom line, mfr’g in April seems to have moderated somewhat but from very healthy levels as likely the persistent cost pressures and uncertainty related to the Japanese disaster were the catalysts. The ISM out on Monday will reconcile all the regional surveys.
Confidence/inflation expectations/what’s next
Final April UoM confidence was about in line with expectations at 69.8, up from 69.6 in the preliminary reading and vs 67.5 in March but is still down from 77.5 in Feb. The gain from March was solely led by the Outlook component which rose a slight.4 pts while Current Conditions were unchanged. Importantly, one year inflation expectations remained very elevated at 4.6%, unchanged with both the preliminary report and with March but compares with the 20 year average of 2.9%. In terms of a rise in consumer prices and its impact on confidence and spending, a multitude of companies have said they will raise prices over the next few months and with respect to the argument over it being transitory or not will be put to the test to see what price hikes stick and which don’t because of consumer pushback. Either way, the cost pressures will be felt by someone.