Following its demise into contraction in February, Chicago PMI jumped back to 53.6 (expansion) in March which is better than expected but remains below January's 55.5 highs. The last 12 months have seen quite unprecedented noise in this economic barometer and MNI reports respondents saying the recovery is "slow and steady... fuelled by warmer weather."
As MNI reports, The Chicago Business Barometer increased 6.0 points to 53.6 in March, the best since January, led by sharp bouncebacks in Production and Employment.
Four of the five Barometer components increased in March, with only Supplier Deliveries declining on the month. March's positive outturn, though, left the three month trend of the Barometer at the highest for just over a year and the Q1 2016 average at the highest since Q4 2014.
Production bounced back to the highest since January, reversing half of February's drop. Employment finally moved back into expansion after spending five months in contraction area, and rose to the highest level since April 2015. New Orders expanded at a faster pace and, like Production, increased to the highest since January. Also on a positive note, Backlogs contracted at the slowest pace since January 2015.
Improvement in March was telegraphed as slow and steady, fuelled by milder weather, new product demand, as well as a shift in focus towards warm weather products. Some businesses reported plans for a strong end of March into early April. However, a few purchasers expected the level of New Orders to taper in April. Other panellists cited "uncertainty surrounding the election" as reason for the added caution, with some businesses cooling plans for non-essential or large capital expenditure plans.
A special question posed in the March Chicago Business Survey showed most respondents were optimistic orders would increase over the coming three months, with 44% saying they would be higher, compared with 13.5% who thought they would be lower. Panellists, though, were less confident this year as compared with outturns of 55.6% and 8.9% respectively when the same question was asked in March 2015.
Those expecting a higher pace of ordering in Q2 2016 said milder weather and favourable seasonal factors would boost business. More importantly, purchasers reported that capital expenditures are starting to be released and work being scheduled.
Employment finally moved back into expansion after spending five months in contraction area, and rose to the highest level since April 2015