Chicago PMI Shows Strong Output and Demand in May

Written by Sandy Williams

The MNI Chicago Business Barometer gained 5.1 points in May, jumping to 62.7 and its highest level since January.

Output and orders drove the increase for manufacturers, although all five Barometer components rose this month. The production index was at a three-month high and new orders at a four-month high.

The backlog index was at the highest level seen since October 2017 as lead times increased on raw materials. Inventories grew in May after a weaker April. Raw material prices continued to soar, remaining above the 70 mark for two consecutive months, said MNI.

“It had been a somewhat sluggish start to the year, perhaps unsurprising after the stellar end to 2017, but the MNI Chicago Business Barometer found a higher gear in May. Although broad based, the rise was largely thanks to a rebound in demand and back-to-back growth in output,” said Jamie Satchi, economist at MNI Indicators.

“The result was, however, assisted by the intensification of supply side constraints, with order backlogs surging and lead times on key materials up sharply,” he added.

Firms were asked to comment on whether supply-side issues were negatively impacting their business and 63.0 percent said yes. About two-thirds of respondents were not worried about the possibility of an interest rate increase in the coming three months, while 22.9 percent said it would be a negative impact on business.

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