Chicago PMI

The Chicago PMI (officially known as the Business Barometer) is a monthly composite index based on opinion surveys of more than 200 Chicago purchasing managers regarding the manufacturing industry. The survey responses are limited to three options: slower, faster and same. As such, the index will not capture if a component is growing but at a much slower rate or vice versa. The index is a composite of seven similarly constructed indexes including: new orders, production, supplier delivery times, backlogs, inventories, prices paid, and employment. New orders and orders backlog indices indicate future production activity. It signals factory-sector expansion when it is above 50 and contraction when below it. The index is seasonally adjusted for the effects of variations within the year, differences due to holidays and institutional changes. Because it is an opinion survey, it is often influenced by respondents’ perception of current events, as opposed to actual hard data. Also, it does not capture technological and production changes, which make it possible for production to expand, while employment contracts. Because the Chicago PMI is released the day before the ISM, it is watched in order to predict the more important ISM report, which is in itself a good leading indicator of overall economic activity. It frequently moves markets. The Chicago PMI is scheduled for release at 9:00 (CST) on the last day of the month, the day before the full ISM report, released by ISM-Chicago.

POTENTIAL IMPACT ON INTEREST RATES: HIGH