Chicago PMI jumps in November, tops expectations
Economic activity in the Chicago area unexpectedly improved in November, according to figures released on Friday.
The MNI Chicago business barometer index rose to 66.4 from 58.4 in October, beating expectations for a drop to 58.0 and comfortably above the 50.0 mark that separates contraction from expansion. This marked the most impressive performance so far this year, ending a three-month run of declines.
MNI said that while there were increases across all five of the barometer's subcomponents, resurgent orders, solid output and higher unfinished orders were the month's key drivers.
Jamie Satchi, economist at MNI Indicators, said: "The MNI Chicago Business Barometer clipped a run of three consecutive declines in emphatic style in November, boosted primarily by resurgent orders - stronger than typically seen at this time of year and enough to push the barometer to its best level since December.
"However, many firms reported seeing the effects of higher China tariffs on their invoices for the first time, and voiced concern that business could be stifled going forward."
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said: "This is a very pleasant surprise, more than reversing a run of three straight declines and taking the index to an 11-month high. The Chicago PMI usually responds in the short-term to swings in the flow of orders for Boeing aircraft - the company’s HQ is in Chicago - but this year it has also been very sensitive to developments in the trade war with China.
"In October, the index was much weaker than implied by Boeing’s orders, in the wake of the tariff announcement on September 18. We expected the undershoot to persist but instead the index is now overshooting. The Chicago PMI and the national ISM manufacturing index trend together, but they can diverge substantially in the short-term, so today’s reading does not guarantee a rebound in the ISM, which dipped to a six-month low in October. But it does make a stronger number more likely. Manufacturing remains under pressure from the tariffs, but the sector is not rolling over. That would change if the current 10% tariff rate jumps to 25% in January, and - especially - if the tariffs are broadened to cover consumer goods, but our base case is that this won’t happen. All eyes, then, on the Xi-Trump meeting this weekend."