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Chicago Purchasing Managers Index increased 0.5 points to 46.3 in March
The Chicago Business Barometer remained in contraction for the second consecutive month in March, failing to bounce back from the sharp plunge in February and pointing to a slowdown in the US economy.
The Barometer increased 0.5 point to 46.3 in March, following a 13.6 point drop in February to a 5½-year low. The Chicago Business Barometer averaged 50.5 in Q1, down from 61.3 in Q4 and the lowest outturn since Q3 2009. While part of this decline may be attributable to the cold weather snap and strike action at west coast ports, the continued weakness in March points to a wider slowdown in business conditions.
Of the five components which make up the Barometer, Production posted the sharpest increase, rising 4.5 points to 49.3, but remaining below the 50 breakeven level. New Orders and Order Backlogs rose slightly, but like Production were unable to move out of contraction after suffering double digit losses in February. A small rise in Employment was in line with muted gains in the ordering components, lifting it back above 50. Supplier Deliveries was the only component to decrease in March.
Generally, purchasers reported business in Q1 was slow as orders softened. There was, however, an expectation that orders would pick-up over the coming quarter. According to a special question included in the March survey, 56% of purchasers surveyed expected higher New Orders within the next three months, while 36% expected orders to remain the same. Only 9% of the purchasers surveyed said they thought New Orders would be lower in Q2.
Disinflationary pressures were still evident in March in line with lower oil prices, with Prices Paid contracting at a faster pace.
Companies built inventories of finished goods at the fastest pace in four months, with the Inventories Indicator rising above 50 for the first time since December. Inventory accumulation was due to both an unplanned rise following weaker demand, as well as some planned stock building due to forecasts of stronger orders in Q2.
Commenting on the Chicago Report, Philip Uglow, Chief Economist of MNI Indicators said, “There was some expectation that the Barometer would bounce back in March following the sharp fall in February. Instead we are faced with a second consecutive sub-50 reading and the weakest quarterly outturn for more than five years. While purchasers expect to see demand increase over the second quarter, for now the data point to a significant loss of momentum in the US economy during Q1.”
Posted: March 31, 2015 Tuesday 10:00 AM