The Chicago purchasing managers index (PMI) for the month of April fell from 62.2 in March to 56.2, the lowest reading since September 2009. A reading above 50 indicates expansion, but economists had been expecting a reading of 60 for April.
Virtually every measure was weaker in April: the production index fell from 68.6 to 57.1; new orders fell from 63.3 to 57.4; and inventories fell from 57.4 to 53.9. On the plus side, order backlog rose from 54.3 to 56.8 and employment rose from 56.3 to 58.7. The order backlog index has risen for 3 consecutive months, but production is down the most in 11 months and this is the second month in a row when new orders have fallen.
Among the ISM panel’s comments:
- High oil cost is creating a cost burden for inbound freight & higher material conversion costs. A sustained increase in the cost of oil (or staying high at the current cost) will have a negative impact on our business and the economy in general because goods and services will cost more and the population will have less to spend on those goods and services. Much of the oil rise seems to be speculation and is rooted in the fear of lack of supply rather than true supply and demand.
- Generally seeing a positive trend in orders.
- Lending is picking up but only to borrowers with stellar credit.
The Chicago PMI report is available here.