Purchasing index stronger than expected, double dip fears overblown

The Chicago purchasing managers’ index was stronger than forecasts, picking up to 62.3 in July from 59.1 in June.

BOTTOM LINE

A funny thing happened on the way to the double dip, the Chicago purchasing managers’ index posted a significant improvement in July on stronger readings for new orders, employment, and production. This puts the Chicago PM index at odds with the other regional indicators of manufacturing in July but this survey carries greater weight because of its closer correlation to the national ISM and the fact that it captures more up-to-date information than the Empire State or Philly Fed surveys. Our models suggest a less significant drop in the national PMI than we previously thought and we project a July ISM manufacturing index of 54.5, which is still down from June’s 56.2 but also consistent with fairly solid growth in activity. We continue to believe that fears of a double-dip are overblown.

In another release, Michigan consumer sentiment for July was upwardly revised by more than expectations, to 67.8 from an initially reported 66.5 (versus 76.0 in June). Both current conditions and consumer expectations were revised higher in July. One-year inflation expectations were downwardly revised to 2.7% from 2.9%, while five-year inflation expectations were unrevised at 2.9%.

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