Tuesday, February 1, 2011

Chicago ISM Screams Higher

From the ISM:

January 2011: The Chicago Purchasing Managers reported the CHICAGO BUSINESS BAROMETER improved to its highest level since July 1988, indicating expansion for a sixteenth consecutive month.


  • PRICES PAID indicated increased inflation, increasing to the highest level since July 2008;
  • EMPLOYMENT strengthened to a height not seen since May 1984;
  • NEW ORDERS increased to the highest point since December 1983;
  • PRODUCTION improved with NEW ORDERS to the strongest level since 2004;
This is a great report, plain and simple. It indicates the manufacturing sector is starting to hit on all cylinders.

For more on manufacturing, see this summation of the latest Beige Book numbers.

Going forward, there are two big road bumps.

1.) China slowing down: China has been a big driver during the current expansion. However, they are seeing higher then desired inflation levels, meaning their central bank is going to start increasing rates. The country will still be growing at strong rates; just not record breaking rates.

2.) Commodity prices: input prices are increasing, but with high unemployment there is little ability to pass the increases onto purchasers. There is some slack in the system according to the latest capacity utilization numbers, but that won't last forever. In addition, the latest Beige Book report indicated that in some districts, capacity utilization is near pre-recession levels.