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Economy in Brief

Chicago PMI Notably Stronger in January
by Carol Stone, CBE  January 29, 2021

• Business activity index in Chicago rises 5.1 points.

• Production, new orders, backlogs and inventories contribute to gain.

• Employment index declined.

The Chicago Purchasing Managers Business Barometer rose 5.1 points in January to 63.8, the highest level since July 2018, when it was 67.1. The low last spring was just 32.9, experienced in May. The Action Economics Forecast had looked for the January reading to decrease to 58.5. A reading above 50 suggests growing business activity in the Chicago area.

Haver Analytics constructs an ISM-Adjusted Chicago Business Barometer with methodology similar to the ISM Composite Index. This measure rose to 61.2 in January from 56.4 in December and remained well above its low of 40.2 reached this past June.

Four of the components activity measures contributed to the increase in the overall index: production, new orders, order backlogs and inventories; all of those had sizable multi-point advances. Prices paid also rose while employment turned down and supplier deliveries softened.

Production advanced 9.9 points in January to 71.3, its strongest since January 2018. In contrast, the weakest production reading in the current business cycle was just 24.3 back in May. The next strongest component of business activity in January is, optimistically, new orders, which rose 7.9 points to 66.2. Its lowest reading was 22.1, also in May. Order backlogs gained markedly as well in the latest reading, 6.9 points, to 60.1. This compares to a May reading of 27.9. Inventories grew in the January survey, increasing 6.2 points to 55.1. Notably, the May reading for inventories was the highest during 2020, 52.6, indicating that reduced demand left companies with more stocks of merchandise, component parts and supplies.

The reading for supplier deliveries eased 0.5 points, but it was still high at 69.9. The press release suggests that freight backups and other logistical issues are keeping that reading elevated. The other component of the survey that showed a decline is employment, which decreased 4.5 point to 43.4. This thus remains relatively low, but its lowest during the recession has been 32.6, which is the least weak reading of all the survey components; so while related jobs aren’t growing yet in the Chicago area, they didn't plunge as dramatically during the spring as other measures of business activity.

The prices paid index showed a 1.7-point increase to 75.2 in January. Its recession "low" was 50.2 back in April, indicating that since the index didn’t fall below 50%, companies did not see overall price declines. Participants reported that they saw notable increases in the cost of steel.

The MNI Chicago Report is produced by MNI in partnership with ISM-Chicago. The survey is collected online each month from manufacturing and non-manufacturing firms in the Chicago area. Summary data are contained in Haver's USECON database with detail including the ISM-style index in the SURVEYS database.

Chicago Purchasing Managers Index (%, SA) Jan Dec Nov Jan '20 2020 2019 2018
General Business Barometer 63.8 58.7 57.8 43.2 49.0 51.4 62.4
ISM-Adjusted General Business Barometer 61.2 57.4 55.8 45.7 49.6 51.5 60.8
   Production 71.3 61.4 60.5 44.4 47.9 51.3 64.6
   New Orders 66.2 58.3 59.9 42.1 47.1 52.0 63.8
   Order Backlogs 60.1 53.2 50.8 34.5 42.6 46.9 58.0
   Inventories 55.1 48.9 46.1 41.4 44.7 48.7 55.4
   Employment 43.4 47.9 43.9 46.7 41.8 49.6 55.2
   Supplier Deliveries 69.9 70.4 68.5 54.0 66.4 55.6 64.8
   Prices Paid 75.2 73.5 72.2 55.1 59.5 58.5 74.0
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