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Chicago Purchasing Managers Index up by 1.1 points to 59.4 in May
The MNI Chicago Business Barometer increased to 59.4 in May from 58.3 in April, the highest level since November 2014.
Optimism among firms about business conditions rose for the fourth consecutive month. Four of the five Barometer components led May’s increase, with only New Orders receding.
After rising for three consecutive months, demand lost ground in May. New orders fell by 4.5 points to 61.4 in May. In contrast, Production continued to strengthen. The indicator was up 3.7 points to 63.2 from 59.5 in April. Order Backlogs jumped out of contractionary territory after five months of decline. Suppliers took longer to deliver key inputs, with the respective indicator at 59.6 compared with 56.0 in April. There were reports of longer delivery times due to suppliers running out of products because of maintaining low inventories.
Companies accumulated inventories at faster pace yet again in anticipation of a busy summer. The Inventories indicator was up by 2.2 points to 55.5 in May.
The Employment indicator was 3.3 points above last month’s level. Although the indicator has expanded only eight times in last 24 months, it is showing tentative signs of a pick-up, sitting above 50 in two of the last three months. Panelists reported a rise in temporary hires and cut down of executive level positions to manage costs.
This month’s special question asked firms if they planned to expand their workforce in the next three months. Over half of respondents planned on hiring, a sign that businesses were optimistic about demand in the summer. While a third of respondents did not intend on hiring, 14% of them were unsure. Of those who were keen on expanding their workforce, 40% intended on hiring permanent employees, 33% on temporary employees and 27% expected a mix of both permanent and temporary employees. When the same question was posed in May 2014, the majority preferred a more permanent setup rather than a flexible and contingent workforce.
Inflationary pressures at the factory gate eased for the third consecutive month. Though Prices Paid remain above 50, implying inflation, the growth rate has eased in recent months. Panelists reported a continued rise in the price of steel and plastic products.
“May’s rise in the MNI Chicago Business Barometer provides a further boost to the business environment. Rising pressure on backlogs and delivery times accompanied with higher production levels suggests firms’ expectations of a busy summer,” said Shaily Mittal, senior economist at MNI Indicators.
Posted: May 31, 2017 Wednesday 09:45 AM