Chicago PMI edges past forecasts in May

A closely-followed gauge of factory sector activity in the Chicago area edged past forecasts in May, but on longer time frames was said to be pointing to softness ahead, although not outright weakness.

Market News International's manufacturing sector Purchasing Managers Index rose from a reading of 52.6 for April to 54.2, narrowly beating forecasts on the Street for a print of 54.0.

But the survey compiler highlighted how the three-month moving average was at its weakest for two years, adding that "furthermore, it is evident that business confidence in the second quarter is going to be significantly weaker than in the first quarter, which was already at sluggish levels."

A gauge of new orders did break its three-month long streak of declines, but failed to offset the drop seen in March, MNI said.

And production remained "significantly below" its 12-month average.

Declines in order backlogs and other components of the survey were also pointing to further lukewarm demand.

Company stockpiling however was said to be returning to its pre 2009 crisis norms following a "strong" 2018 in terms of demand and confidence.

Hiring activity meanwhile was "neutral" due to a lack of adequate skills and volatility in demand.

"There is no getting away from the general softness in the data," said Shaily Mittal, senior economist at MNI.

"Indicators are significantly below their last year averages but are moving towards their long-term means, implying that if business conditions are not as bright as they were, they are not bad either."