Econintersect: The Chicago Business Barometer increased 5.7 points to a one year high of 66.2 in October, as there was a double digit improvement in new orders.

The market expected the index between 58.0 and 61.5 (consensus 60.5) versus the actual at 66.2. A number below 50 indicates contraction. From the authors of the index:

The bounceback in the Barometer marks a solid start to Q4 and suggests that against a backdrop of concerns about weakening growth in Europe and China, the US economy is still growing firmly. New Orders was the strongest component of the Barometer and increased sharply to 73.6, the highest level since October 2013.

Production also strengthened further following a sharp decline in the previous month, and has been running at a firm pace for some time now. The October survey also showed that higher demand and solid output encouraged companies to create jobs. Employment increased to the highest level since November 2013, a potential sign that the recovery is becoming more entrenched.

While the level of Inventories eased from the 41-year high seen in September, it remained firm and points to a continued stock build in line with strong sales forecasts and to cope with potential spikes in unplanned orders. Order Backlogs also expanded faster, while Supplier Deliveries declined for the first time in six months, contributing negatively to the Barometer but giving some relief to business. Lower crude oil prices saw inflationary pressures ease, with the Prices Paid measure falling below the average seen over the past year.

Commenting on the Chicago Report, Philip Uglow, Chief Economist of MNI Indicators said, “The strengthening in the Chicago Business Barometer suggests that the US economic recovery is more entrenched. The October survey also provided clearer evidence that companies are taking on more workers to keep up with higher demand.” “Concerns about the global economy and the continued low level of inflationary pressures may persuade the Fed to keep rates lower for longer, but the domestic economy is growing healthily.”

The Chicago ISM is important as it is a window into the national ISM reports which will be issued shortly. When you compare the graph below of the ISM Manufacturing Index against the Chicago PMI (graph above) - there is a general correlation in trends, but not necessarily correlation in values.

source and read the full report: Chicago PMI