Chicago NAPM Index Better Than Expected

Chicago manufacturing index dips
By James P. Miller Tribune staff reporter
9:57 AM CDT, June 30, 2008

Manufacturing activity in the heavily industrialized Chicago area showed a fractional decline in June, but showed more resilience than most economists had been anticipating, according to a report issued Monday.
NAPM Chicago said its business barometer, commonly referred to as the Chicago PMI or purchasing managers index, firmed to 49.6 in June from May’s 49.1 reading. The upturn came as a surprise for most economists, who had been expecting the Chicago index to decline to 48.0. Under the format used by NAPM Chicago, any reading below 50 indicates that manufacturing activity is weakening, while an above-50 level indicates the sector is expanding.
The unexpected improvement in the index is encouraging, said Moody's Economy.com's Ryan Sweet, but the economist also noted that the Chicago PMI has now been in below-50 contraction territory for five consecutive months. In addition, Sweet said, details of the report were less upbeat than the headline number would suggest. The monthly survey examines a number of different indicators, with separate readings for new orders, inventory levels, employment trends and the like. New orders, a forward-looking statistic that offers a clue to future industrial activity, softened to 52.0 in June from 56.1 in May, and production dropped to 45.1 its lowest reading in more than seven years. Readings for employment, supplier deliveries and inventries managed to improve in June, noted High Frequency Economics economist Ian Shepherdson, so the overall picture is not as grim as we expected in the light of the huge, sustained drop in auto sales.”