Chicago PMI Report Showing Indications Of Capacity Stress

Increasing indications of capacity stress now include the prices paid index of the Chicago PMI report which moved over 70 in April for a 22.8 percent year-on-year rise. This is a 7-1/2 year high and reflects, in large part, rising steel prices. The headline index came in at 57.6 in the April report which is a strong rate of growth but down from last year's late run in the mid-60s. New orders have slowed this month while backlogs, for a fourth straight month, posted a decline.

The slowing in orders is probably welcome for this sample where signs of capacity stress, beyond prices, also include delivery times which continue to lengthen and where tie-ups in steel shipments are a factor. Steel is not moving into inventories, at least yet as inventories posted their lowest reading since August. Other indications in today's report include a 6-month low for employment.