Chicago PMI Shows Continued Momentum in US Manufacturing
In a leading indicator the Chicago PMI came in stronger-than-expected for the December period. The index posted a reading of 62.5, basically matching November 62.6 and much stronger than the forecast of a 60.4 print which would have meant a slower expansion of activity.
New orders eased to 60.0 from November 70.2, while the employment index rose to 58.6 from 56.9 – a positive for the US labor market.
The Chicago PMI is important because the factories in that region track the US auto industry quite nicely and the report shows that the pick up in momentum in the US economy, which we have seen from data over the last couple of months, continues. That furthers the “growth divergence story” between America and that of Europe and Asia.
The Chicago PMI is used as a curtain opener for the ISM manufacturing index which will get in Tuesday’s session next week.
Other regional manufacturing reports were better-than-expected this month as well as the Empire manufacturing index climbed to 9.5 from November 0.6 and the Philadelphia fed index rose to 10.3 from 3.6.
That all bodes well for the upcoming national manufacturing activity report.
US consumers have increased their spending on cars of late and that the bodes well for US factories, especially as inventories have been run down in anticipation of leaner times ahead.
While of course the risk of a negative development in the euro zone sovereign debt crisis looms large, one concern is that the EUR/USD which has moves below the $1.30 level this week means that US exports become more expensive abroad. That could limit one avenue of growth for US manufacturers.
In any case, coupled with a positive report on housing, the S&P pushed to new highs following the Chicago PMI release.
From Bloomberg: “The number of Americans signing contracts to buy previously owned homes rose more than forecast in November as falling prices and low borrowing costs boosted demand.
The index of pending home sales increased 7.3 percent to the highest level since April 2010 after climbing 10.4 percent the prior month, figures from the National Association of Realtors showed today in Washington. Economists forecast a 1.5 percent gain, according to the median estimate in a Bloomberg News survey.
The two reports help to help to mitigate the week fundamental report we saw in jobless claims and boost tentative “risk-on” sentiment in the currency markets.
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