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Chicago PMI Beats Expectations, Suggests Strong Industrial Sector

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The Chicago PMI for June increased to 52.9 from 52.7 in May. The report beat expectations of 52.3. This number may be seen as positive for the manufacturing sector, and for general economic health in the United States.

The Chicago PMI is based on data compiled from purchasing and supply executives in the Chicago-area. The Index measures new orders, the backlog of orders, new export orders, imports, production, supplier deliveries, inventories, customers' inventories, employment and prices. It establishes a consensus of economic health for Chicago-area manufacturing.

The number is sent out by the ISM-Chicago to paid subscribers early, allowing subscribers to take advantage ahead of the broader financial market.

However, recently, social networks--particularly Twitter--have largely killed that advantage. Traders can generally find the number being posted online ahead of the official release.

According to the report, the June Chicago Business Barometer stabilized just above May's 33-month low. The short-term trend of the Chicago Business Barometer fell for the third month. The three-month moving average of each business activity index, except employment, fell in June.

Production rebounded, but new orders and order backlogs are at their lowest level since September 2009.


ACTION ITEMS:
Traders who believe that the Chicago PMI is a leading indicator for the US economy, might want to consider the following trades:
  • Long general industrial companies like Illinois Tool Works (NYSE: ITW) or Caterpillar (NYSE: CAT) as these companies could benefit from increasing industrial production.
  • Long industrial commodities like crude oil (NYSE: USO) or copper (NYSE: JJC).
Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

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