Economy

Chicago PMI Surges in June

June 30, 2016

The Chicago Business Barometer jumped 7.5 points to 56.8 in June for its highest reading since January 2015, according to MNI Indicators. The Chicago Business Barometer, or Chicago PMI, is a measure of economic activity in the Chicago area based on survey responses of purchasing managers in the region.

Although the rebound was welcomed, it just barely offset the previous two months of weakness. The average for the barometer in second quarter was 52.2 in compared with 42.3 in Q1. The surge in June’s results surprised analysts who were expecting a reading of 50.7.

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.”

New orders were at their highest level since October 2014 and production at its highest since January 2016. Order backlogs emerged from sixteen months of contraction to record its highest level since March 2011.

A contraction in inventories over the past seven months ended in June with a double digit increase from May’s six and half year low. When asked about changes in inventory, firms were split equally on whether they were increasing or decreasing levels.

MNI Indicators suggests that the shortening of delivery times in June, after two months of lengthening, indicates bottlenecks in the supply chain have cleared.

Employment levels fell below the 50 neutral point in June, contracting at the fastest pace since November 2009. It was the only component of the Barometer in contraction in June.

When asked about order prospects for the future, 46 percent of firms expected orders to increase in the third quarter, little changed from March’s result of 44 percent expecting increases in the second quarter, but down significantly down from the confidence level of 57 percent in June 2015.

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