Chicaco PMI falls to six-month low in February

Economic activity in the Chicago area deteriorated more than expected in February, according to figures released on Wednesday.

The MNI Chicago Business Barometer fell to 61.9 this month from 65.7 in January, reaching its lowest level since August 2017 and missing expectations of a smaller decline to 64.1.

As in January, firms reported a slower pace of both incoming orders and output. The new orders indicator dropped to a six-month low, contributing the most to the barometer’s decline, while the production indicator also slipped, to a level last seen lower in September.

Jamie Satchi, economist at MNI Indicators, said: "Disruptive weather conditions this month and large promotions at the back-end of last year appear to have weighed on demand and output in February, but despite the Barometer’s broad-based decline activity remains upbeat.

"That said, a large proportion of firms are anxious about the cost of input materials, and warn they could pass on these higher costs to consumers if inflationary pressures do not abate."

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said: "This dip in the index to a six-month low is likely to reverse in March. The index tends to track movements in orders for Boeing aircraft - the company's HQ is in Chicago - with a lag of three months or so. The March index undershot slightly but is well within the bounds of normal error, and we expect it to rebound to 66 or so in March, and then remain at that level through May at least. The robust industrial recovery continues.

"Taking these and other regional data into account, we reckon tomorrow's ISM manufacturing index will dip to about 58.5 from 59.1, a modest decline leaving it still at a very high level."