Chicago PMI Beats Expectations, Only Manufacturing Survey that Does Not Show Contraction in August

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Last Update: 31-Aug-11 12:26 ET

The Chicago Purchasing Managers Index from Kingsbury International, Ltd., decelerated for the second consecutive month, falling from 58.8 in July to 56.5 in August. This is the lowest the Chicago PMI has been since November 2009. The Briefing.com consensus expected the Chicago PMI to fall to 53.0.

Despite the dip, manufacturing in the Chicago region remained in an expansion cycle. In contrast, every other region surveyed by the Federal Reserve either entered a contraction or remained in a contraction in August.

The relatively solid numbers in the Chicago region could reflect a return to normalcy in the motor vehicle sector. After months of slow production due to parts shortages following the Japanese earthquake and tsunami, the motor vehicle sector may be producing at above seasonal levels in order to replace low inventories.

Production growth slowed as the index fell from 64.3 in July to 57.8 in August. After a one month respite, order backlogs contracted and fell from 55.7 in July to 49.6 in August. That leaves future production gains in September reliant upon growth in new orders.

New orders decelerated in August with the corresponding index falling from 59.4 in July to 56.9. That level, though, is still robust compared to new orders growth in other manufacturing regions. In those surveys, only the Kansas City region showed an expansion in new orders.