Considering all the predictions of a double dip recession its amazing to see a Chicago PMI in the 57 range. Especially considering the major weakness in the report was inventories down to 46.5. All other indicators remain very strong and back up our conclusions in the past that the supposed gains in inventories haven't really taken place.
Today the August Chicago PMI came in at 56.7 versus the 56 consensus estimate and 62.3 in July. Definitely a slowdown from July, but any diffusion index solidly over 50 is very positive. New orders were a strong 55 and backlogs were at 56.2. The important numbers remain very positive signaling growth in the future with any support from the markets.
Chicago purchasers report solid but slower month-to-month growth in August. The Chicago purchasers' index came in at 57.2, down sizably from 62.3 in July but still well above breakeven 50. New orders rose in the month, at an index of 55.0 but down from July's 64.6 for the slowest reading of the year. In an offset, backlogs, at 56.2, show a very strong gain for the month. Inventories are a negative, down more than four points to 46.5 to signal month-to-month contraction. But given solid shipping activity, some of this draw likely reflects production needs. Other readings indicate solid activity including greater slowing in deliveries and steady a month-to-month increase for employment.
The thing to remember with diffusion indexes is that lower readings are not necessarily a disaster. The readings in this report are holding well above 50 to indicate continued growth underway for the Chicago economy. The data point to favorable though slowing readings for tomorrow's ISM report on the manufacturing sector and Friday's ISM report on the non-manufacturing sector.