Friday, July 31, 2009

Chicago PMI gains ground but remains negative

The Chicago Purchasing Managers' Index, which is a look at manufacturing conditions in the Midwest, increased to 43.4 in July, up from 39.9 in June. The index is more volatile than the ISM Manufacturing survey, which will be released on Monday and is a closely-followed look at conditions across the country. A reading of 50 suggests neither growth nor contraction in the sector.

At its current level, the Chicago PMI stands at its highest reading since last October, signaling that recessionary conditions continue to ease. But at 43.4, it sits below the ISM, which may be due to the heavy concentration of auto-related companies in the Midwest.

Companies involved in manufacturing have slashed production at a rapid pace in order to move excess inventories. We have seen goods on hand fall, and as sales begin to pick up, inventories should more closely line up with demand. When that happens, production will once again begin to rise.

 Economists polled by Reuters had forecast a July figure of
43.0.
(seasonal adj)
                       July  June    May    April  March  Feb
NAPM-Chicago 43.4 39.9 34.9 40.1 31.4 34.2
Production 43.3 39.3 38.1 38.1 32.7 34.7
New Orders* 48.0 41.6 37.3 42.1 30.9 30.6
Order Backlog* 32.1 37.6 26.3 36.9 21.3 29.3
Inventories 25.4 34.2 31.5 30.6 34.9 33.0
Employment* 35.3 28.9 25.0 31.8 28.1 26.2
Supplier Deliveries* 49.6 43.1 43.0 45.4 48.4 51.0
Prices Paid 35.0 36.3 29.8 28.4 34.1 37.8
The * indicates components used to calculate index.
Source: Reuters

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