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Economy in Brief

U.S. Chicago Business Barometer Improves
by Tom Moeller  May 31, 2019

The Chicago Purchasing Managers Business Barometer increased to 54.2 during May from April's 52.6, which was the lowest reading since January 2017. The Action Economics Forecast Survey expected a lesser increase to 53.8. The Chicago Purchasing Managers figures are diffusion indexes where readings above 50 indicate growth.

In contrast to the ISM Composite Index, which is constructed from five components, Chicago's General Business Barometer is based on the answer to a single question. Haver Analytics uses Chicago's components to build a headline index using methodology similar to that used to calculate the ISM index. This measure improved to 54.5 in May from 52.6 in April. Over the past 15 years, this ISM-adjusted Chicago index has an 83% correlation with the national ISM Manufacturing Index, which is scheduled for release on Monday.

Improvement in the overall index was accompanied by increases in the readings covering production, new orders and inventories. These gains were offset by declines in the order backlog and supplier delivery series, the latter indicating the quickest rate of order fulfillment since March 2017.

The employment index fell slightly to the lowest point since October 2017. Seventeen percent of respondents (NSA) reported more hiring versus 24% who did so last May. Seventeen percent of respondents also reported less hiring versus 14% twelve months earlier. During the last ten years there has been a 64% correlation between the employment index and the m/m change in factory sector payrolls.

The prices paid index rose slightly but remained well below the highs during the third quarter of last year. Twenty three percent (NSA) of respondents reported higher pries versus 56% a year earlier. Seven percent of respondents reported lower prices versus two percent last year.

The MNI Chicago Report is produced by MNI in partnership with ISM-Chicago. The survey covers a sample of over 200 purchasing professionals in the Chicago area with a monthly response rate of about 50%. Summary data are contained in Haver's USECON database, with detail including the ISM-style index in the SURVEYS database. The Action Economics Forecast Survey is available in AS1REPNA.

Chicago Purchasing Managers Index (%, SA) May Apr Mar May '18 2018 2017 2016
General Business Barometer 54.2 52.6 58.7 63.5 62.4 60.7 53.0
ISM-Adjusted General Business Barometer 54.5 52.6 57.7 61.3 60.7 59.0 51.9
  Production 57.3 50.5 64.2 66.3 64.5 64.2 54.5
  New Orders 58.6 54.6 59.8 64.7 63.8 63.6 55.6
  Order Backlogs 41.1 51.2 44.7 59.7 58.0 55.2 47.1
  Inventories 51.4 49.9 47.4 55.2 55.3 54.9 47.2
  Employment 50.0 50.4 56.2 55.0 55.2 52.9 49.4
  Supplier Deliveries 55.4 57.4 60.9 65.3 64.8 59.4 52.8
  Prices Paid 53.8 50.8 64.5 71.6 74.0 64.1 53.2
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