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Chicago Purchasing Managers Index increased 12.7 points to 55.6 in January
The Chicago Business Barometer bounced back sharply in January, increasing 12.7 points to 55.6 from 42.9 in December, the highest pace of growth in a year.
The latest increase followed extreme weakness in the fourth quarter, with the Barometer averaging 47.7, the weakest quarterly growth since Q3 2009. The three month trend remained depressed at 48.7, up only slightly from 47.7 in December.
Four out of the five components of the Barometer increased on the month, led by a 20.2 point surge in New Orders to 58.8, the highest since January 2015. Additionally, Production, the second largest component of the Barometer posted a double digit gain pushing it back well above the 50 neutral level.
Order Backlogs rose sharply but remained below 50 for the 12th consecutive month. Employment, which has not suffered as sharp of a downturn as orders and output increased more moderately and remained in contraction where it has been since October 2015. Supplier Deliveries was the only component to fall, declining 4.5 points to 49.2 in January.
In spite of the strength in New Orders and Production, companies continued to run down stocks with the Inventories component falling to the lowest since January 2015.
Continued weakness in commodity prices and the impact of the strong dollar meant that the long-term disinflationary trend continued, with downward pressure on prices intensifying in January. Prices Paid declined slightly on the month and remains well below the breakeven 50 level.
Chief Economist of MNI Indicators Philip Uglow said, “While the surge in activity in January marks a positive start to the year, it follows significant weakness in the previous two months, with the latest rise not sufficient to offset the previous falls in output and orders. Previously, surges of such magnitude have not been maintained so we would expect to see some easing in February. Still, even if activity does moderate somewhat next month, the latest increase supports the view that GDP will bounce back in Q1 following the expected slowdown in Q4.”
Posted: January 29, 2016 Friday 09:45 AM