Chicago PMI: Factory Activity Declines Modestly
May 31, 2016
Bottom Line: Manufacturing activity in the Chicago region contracted modestly in May to 49.3%. So far the score for the regional surveys is 4 to 1 in favor of a weaker activity (this, Empire, Richmond and Kansas City over Philly), suggesting a modest decline of about 1.2% to 50.2% is possible for ISM Manufacturing, slightly lower than the current market consensus of a decline to 50.3%. The Chicago Purchasing Managers' Index FELL by 1.1 points to 49.3% in May, below market expectations for an increase to 50.5%. The report highlighted that, "The Barometerâ€™s decline was led by a 6.6 point fall in Production and was accompanied by a mild setback in New Orders, with both falling below 50. While these were the only components that fell between April and May, out of the five components which make up the Barometer, four of them were in contraction. Only Supplier Deliveries was above 50. Production fell to the lowest level since February, while New Orders declined to the lowest since December 2015. In contrast, Order Backlogs bounced back 9.0 points, although failed to recoup all of Aprilâ€™s large loss, and remained below 50 for the 16th consecutive month. Employment rose marginally but also remained in contraction where it has been in ten of the past 12 months. Inventories tumbled by 11.7 points to 37.9 in May, the lowest since November 2009 and the seventh consecutive month in contraction. Supplier Deliveries were unchanged on the month following a solid rise in April that left the indicator at the highest since October 2014 and suggesting there have been some bottlenecks in the supply chain. Time to source production materiel lengthened to the highest since August 2014 while that for capital equipment was the largest since June 2006. Prices Paid fell slightly having picked up by more than 10.0 points in April." On an ISM weighted basis Empire State fell by -9.3%, Richmond fell by -9.7%, Philly rose by 6.1% and Kansas City fell by -0.1%.
Article by contingentmacro