Chicago Business Index Sends Mixed Messages

Chicago Business Index Sends Mixed Messages

The Chicago economy continues to expand, according to a new September Chicago Business Barometer report (link opens a PDF) released today by the Institute for Supply Management (ISM).

After clocking in at 53.0 for August, September's index managed to make it up to 55.7. Analysts were pleasantly surprised by the report, having expected a slightly more conservative bump to 54.4.

September marks the third straight month of index increases, its longest stretch of improvements in more than three years.

The ISM creates its index from surveys of purchasing and supply chain professionals based in Chicago. An above-50 rating indicates expansion, while below 50 implies a contraction from the previous month. Although the geographic focus is limited to the Chicago area, investors keep tabs on the index as a leading indicator of U.S. economic activity.

According to the report, this month's improvement stemmed primarily from gains in production, new orders, and supplier deliveries components. New orders hit their highest level since February, although orders backlogs made only a small gain to stay stuck below 50.

But a three-month dip in employment remains troublesome for sustainable growth. "While the pick-up is welcomed, growth is far from solid," said Chief Economist for MNI Indicators (an ISM partner) Philip Uglow in a statement today. "The easing in the employment component is a notable setback this month, underlying the fragility of the recovery."


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