The National Association of Purchasing Management - Chicago compiles a survey and a composite diffusion index of business conditions in the Chicago area. Manufacturing and non-manufacturing firms are both surveyed, but until recently, market players have believed that the survey primarily covers the manufacturing sector. Readings above 50 percent indicate an expanding business sector. The NAPM - Chicago is considered a leading indicator of the ISM manufacturing index. Why Investors Care
| Released on 8/29/08 For Aug 2008 | ||||||||||||
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Highlights
Orders and production surged in the Chicago manufacturing region during August, in a report, no matter how volatile by reputation, that points to gains in next week's ISM manufacturing and non-manufacturing surveys. The Chicago purchasers' index jumped to 57.9 from 50.8 in July reflecting spectacular month-to-month jumps in new orders -- 60.2 vs. 53.5 -- and production -- 63.4 vs. 49.2. Backlog orders were another big positive, surging nearly 20 points to 63.0 vs. 45.7. Employment is lagging, contracting further below 50 to 39.2 vs. 45.9. Given the surge in production, the drop in employment suggests Chicago-area firms extended the workweek during August.
Inventories showed easing accumulation at 52.2 vs. 54.9 though the gain in production points to inventory building in future months in what is another bonus for production. Supplier deliveries continued to extend but to a lesser degree at 55.1 vs. 60.8.
Input prices remain elevated but a little less severely at 80.6 for a 10.1 point drop from July. The fall in oil prices should help limit new increases in input prices, though the strong surge in overall demand does raise questions over the assumption that slower demand would help limit price pressures during the second half.
The dollar rose sharply in reaction to the results which underscore the strength seen earlier in the week in the durable goods report. Similar results in next week's ISM reports would definitely ease the risk of second-half recession -- even given softness, if not contraction, in consumer spending.
The NAPM-Chicago purchasing managers' index edged back into positive territory in July, reaching 50.8 and following a string of five straight sub-50 readings. We may see a little further improvement in August as new orders were a little further above the break even mark, coming in at 53.5 versus 52.0 in June. The prices paid index has been extremely elevated in recent months with July's reading of 90.7 the highest since a 90.9 level in March 1980. But the prices paid index may start to ease with the recent declines in oil prices.
NAPM-Chicago Consensus Forecast for August 08: 49.8
Range: 49.0 to 51.5
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The NAPM-Chicago Survey registers manufacturing and non-manufacturing activity in the Chicago region. Investors care about this indicator because the Chicago region mirrors the nation in its distribution of manufacturing activity. Consequently, the NAPM-Chicago survey often moves together with the ISM index, but is reported one day in advance. |
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