Chicago PMI reflects red-hot manufacturing sector

As the recovery begins to broaden, manufacturers, which helped to stabilize and pull the economy out of the worst recession since the 1930s, continue to expand at an ever-quickening pace, at least according to the Chicago Purchasing Managers’ survey.

The Chicago PMI, increased from 68.8 in December to 71.2 in January, the highest reading since July 1988.  A reading of 50 suggests manufacturing is neither expanding nor contracting.



Even better, new orders – a proxy for future activity – edged up from 75.7 to 75.9, the best reading since December 1983!  Meanwhile, production grew by 5.5 points to the torrid pace of 78.2, and employment, which eased from a 27-year high, remained favorable.

However, the fast-paced expansion in manufacturing has not been without some problems, as growth continues to boost prices at the early stages of production and crimp profit margins.

The Chicago PMI, which looks at manufacturing in the Midwest, tends to be a bit more volatile than the closely-followed ISM Manufacturing Index, which measures production on a national level.

Still, a reading of over 70 is loudly suggesting that manufacturing is firing on all cylinders, and components within the index are signaling the all-clear sign in the short term.