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Chicago Purchasing Managers Index rose 7.5 points to 56.8 in June
The MNI Chicago Business Barometer rose 7.5 points to 56.8 in June from 49.3 in May, the highest since January 2015, led by strong gains in New Orders and Production.
June’s rebound was just enough to offset the previous two months of weakness, leaving the Barometer broadly unchanged over the quarter at an average of 52.2 in Q2 compared with 52.3 in Q1.
New Orders increased sharply on the month to the highest since October 2014, while Order Backlogs rose to the highest since March 2011, breaking a 16-month run of below 50 readings. Production also increased significantly to the highest since January 2016.
From November 2015 through to May 2016 firms ran down inventory levels. June, however, saw a double digit increase from May’s 6½ year low, ending a seven month run in contraction, with an equal number of firms increasing inventories as decreasing them.
Companies, though, were not as confident as last year about the future level of orders. In response to a special question, 46% of respondents anticipated higher orders in Q3. This was little changed from the March result which showed 44% expected higher orders in Q2, but was significantly down from 57% in June 2015.
Despite higher orders and output, demand for labour fell. Employment contracted at the fastest pace since November 2009 and was the only component of the Barometer below the neutral 50 level in June.
Following a significant lengthening in Supplier Delivery Times in April and May, data for June showed a shortening back to 50.0, suggesting bottlenecks in the supply chain have cleared. This was in line with all three buying policies which shortened in June.
Inflationary pressures were little changed on the month, with Prices Paid hovering just a shade below April’s 17-month high, following the recovery in the oil price and increases in other raw materials’ prices. Chief Economist of MNI Indicators Philip Uglow said,
“June’s sharp increase in the MNI Chicago Business Barometer needs to be viewed in the context of the weakness seen in April and May. Looking at the three-month average provides a better guide this month to the underlying trend in the economy with activity broadly unchanged between Q1 and Q2. Still, on a trend basis activity over the past four months is running above the very low levels seen around the turn of the year.”
Posted: June 30, 2016 Thursday 09:45 AM