Chicago PMI Surges In October

Volatility is not that unusual for the Chicago PMI which surged 7.5 points from September and 6.0 points over consensus to a 56.2 level that points to sudden acceleration and solid growth this month for the whole of the Chicago economy. New orders and especially production are showing strength with both at their best levels of the year. The production reading, in fact, surged nearly 20 points in a reminder of how volatile this series can be.

Inventories are also up sharply, suggesting that Chicago businesses may be ramping up for stronger output going into the holidays. Hiring fell back to neutral following three months of gains and, in another negative, order backlogs are down for an eighth straight month. And for a third straight month, prices are in contraction.

Advance indications on the October economy are mixed with a sweep of regional Fed surveys pointing to another month of contraction for the factory sector but other readings, including this one, mixed to upbeat. Still, the volatility of this report should limit its impact on the month's outlook.

Recent History Of This Indicator:
The Chicago PMI is a one of a kind, a regional report that tracks the whole scope of the economy, at least for Chicago. Big swings are the norm for this closely watched report but one isn't expected for October with the consensus calling for marginal monthly contraction, at 49.2 for what would be a small 1/2 point gain.