Chicago PMI beats expectations in February

Economic activity in the Chicago area improved much more than expected in February amid a surge in new orders, according to figures released on Thursday.

The MNI Chicago business barometer index rose to 64.7 this month from 56.7 in January, beating expectations for a reading of 57.5. This marked the highest level for the index since December 2017.

Four out of five of the barometer's sub-components rose, with only supplier deliveries receding.

New orders rose by 15.2 points, the largest monthly increase since January 2016, when it jumped 17.4 points. Meanwhile, the sub-index for production was up 8.5 points to a fresh six-month high.

The component for order backlogs was up 5.6 points, offsetting January’s decline. Meanwhile, supplier delivery times continued to subside this month, marking the fourth consecutive decline and hitting the lowest level since June 2017.

Shaily Mittal, senior economist at MNI Indicators, said: "The sharp pick-up in the barometer to a level not seen in over a year, underpinned by the growth in demand and production, showcases a healthy image of the US economy.

"With the Fed’s cautious approach towards monetary tightening along with soft inflation, firms remain optimistic about their business activity."

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said: "January’s 8.7-point plunge always looked suspiciously large - businesses seem to have reacted very badly to the government shutdown - but we didn’t expect quite such a big rebound this month, given the continued downward pressure on manufacturing globally.

"The Chicago PMI is more volatile than the national ISM and is not always a reliable guide to its month-to-month movements, but this reading does make it more likely that tomorrow’s ISM index dips only slightly; it might even rise a bit, though the grim numbers from China overnight make that a tough call. Either way, we doubt manufacturing has yet hit bottom; the next few months are going to be difficult."