Chicago purchasing managers index unexpectedly rises to 15-month high

The U.S. economy ended November on a positive note, as the Chicago purchasing managers index unexpectedly rose to 56.1 from 54.2 in October, the Institute for Supply Management-Chicago announced Monday, according to Bloomberg News. It was the highest reading for the index since August 2008.

A Bloomberg News survey had expected the Chicago PMI to fall to 53.0 in November. Readings above 50 indicate an expansion; below 50, a contraction. The Chicago PMI totaled 46.1 in September and 50 in August.

Economists monitor the Chicago PMI because it's generally viewed as a representative indicator of sentiment in the nation's industrial, manufacturing core. The Chicago PMI also provides a preview of national production surveys (manufacturing and services) and factory order data released later in the month.

On Tuesday, investors will evaluate whether the manufacturing sector's nearly year-long recovery strengthened nationally, when the Institute for Supply Management releases its manufacturing index for November. The index jumped three points to 55.7 in October, and has been above the 50 expansion/contraction level for three straight months.

Economic Analysis

The November Chicago PMI rise was a pleasant surprise, and one has to be encouraged by the gradual improvement in the nation's manufacturing sector, as the PMI and other production indicators show, after the longest and deepest industrial contraction in more than 25 years. Production is on the rebound.

That said, investors should keep in mind the new structure of the U.S. economy, and its impact on GDP and job growth: A portion of U.S. manufacturing has been permanently lost to globalization, which underscores the need for the U.S. to identify and create new, value-added industrial and technology sectors (renewable energy, information technology, high-end manufacturing, infrastructure, etc.) to make up for the loss of industrial output and jobs. New sectors must appear for the U.S. to remain a strong, versatile and prosperous nation with ample economic opportunities.

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