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Chicago PMI: Jump bodes well for National ISM tomorrow

June 30, 2016
Bottom Line: Manufacturing activity in the Chicago region contracted rebounded sharply in June with ISM Chicago's barometer jumping to 56.8% from 49.3. This is the highest reading since January '15. However, the reported noted a sharp rebound in inventories and a special question about the future level of orders showed respondents were only about as confident as when asked in March and significantly less confident than this time last year. On net the regional surveys present a mixed picture for the national ISM, expected to hold steady at 51.3. With this survey coming later in the month, we would have to suggest the balance of probabilities leaves a chance tomorrow's number is a touch better than consensus -- but that is a close call. And longer-term trends in these surveys suggest manufacturing activity is set to grow very modestly in coming quarters.

The Chicago Purchasing Managers' Index ROSE by 7.5 points to 56.8% in June, above market expectations for an increase to 51.0%. The report highlighted that, “New Orders increased sharply on the month to the highest since October 2014, while Order Backlogs rose to the highest since March 2011, breaking a 16-month run of below 50 readings. Production also increased significantly to the highest since January 2016. ” Inventories: "saw a double digit increase from May’s 6½ year low, ending a seven month run in contraction, with an equal number of firms increasing inventories as decreasing them."

On an ISM weighted basis Empire State rose by 7.2%. Richmond fell by -2.6%, Philly fell by -2.0%, Kansas City increased by 8.1%, and Dallas fell by -0.7%.
Article by contingentmacro