Chicago Purchasing Managers’ Index Increased to 50 in August
A measure of U.S. business activity rose more than forecast in August, adding to signs that the economy may be entering a recovery.
The Institute for Supply Management-Chicago Inc. said today its business barometer increased to 50, the highest level since September, from 43.4 in July. Readings below 50 signal a contraction.
Automakers are likely to be at the epicenter of a rebound in manufacturing over coming months as assembly lines speed up after the government’s “cash-for-clunkers” plan left dealer lots bare. Increasing demand from overseas and a record reduction in inventories mean a pickup in factory orders and production may last for much of the rest of the year.
“The manufacturing sector is sparking back to life,” Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce in Toronto, said before the report. “It’s not just cash-for-clunkers, auto plants were already scheduled to be coming back online and that creates additional demand for steel and parts.”
Economists surveyed by Bloomberg News forecast the index would rise to 48, according to the median of 53 projections. Estimates ranged from 46 to 52.5.
Economists watch the Chicago index for an early reading on the outlook for overall U.S. manufacturing, which makes up about 12 percent of the economy. The Institute for Supply Management is scheduled to release its August factory report tomorrow. According to a Bloomberg survey, that measure will show expansion for the first time since January 2008.
Other reports this month also showed manufacturing improving. The Philadelphia and New York Federal Reserve Banks’ economic indexes expanded this month for the first time since September and April 2008, respectively.