Seriously!! Chicago PMI spiked to 56.8 in June (from 49.3) – higher than the highest estimate and seven standard deviations above expectations. This is the highest since Jan 2015. Simply put, the number is beyond any credibility, as despite higher orders and output, demand for labor fell as employment contracted at the fastest pace since November 2009.
Only 4 components rose in June as PMI soared above the forecast range 48.8 – 54 from 40 economists surveyed
- Prices Paid fell compared to last month
- New Orders rose compared to last month
- Employment fell compared to last month
- Inventory rose compared to last month
- Supplier Deliveries fell compared to last month
- Production rose compared to last month
- Order Backlogs rose compared to last month
- Business activity has been positive for 7 months over the past year.
Just a little jump away from 'norms' as we have seen before…
As MNI reports,
New Orders increased sharply on the month to the highest since October 2014, while Order Backlogs rose to the highest since March 2011, breaking a 16-month run of below 50.0 readings. Production also increased significantly to the highest since January 2016.
From November 2015 through to May 2016 firms ran down inventory levels. June, however, saw a double digit increase from May's 6-1/2 year low, ending a seven month run in contraction, with an equal number of firms increasing inventories as decreasing them.
Companies, though, were not as confident as last year about the future level of orders. In response to a special question, 46% of respondents anticipated higher orders in Q3. This was little changed from the March result which showed 44% expected higher orders in Q2, but was significantly down from 57% in June 2015.
Despite higher orders and output, demand for labor fell. Employment contracted at the fastest pace since November 2009.
Commenting on the latest survey, Chief Economist of MNI Indicators, Philip Uglow said,
"June's sharp increase in the MNI Chicago Business Barometer needs to be viewed in the context of the weakness seen in April and May. Looking at the three-month average provides a better guide this month to the underlying trend in the economy with activity broadly unchanged between Q1 and Q2. Still, on a trend basis activity over the past four months is running above the very low levels seen around the turn of the year."
And even Wall Street's biggest nouveau permabear, Joe LaVorgna threw up on the number:
Chicago PMI is at its highest reading since Jan 15 but #employment component is lowest since Nov 2009
— Joseph A. LaVorgna (@Lavorgnanomics) June 30, 2016
Finally, something "odd" happened into this print…Normally liquidity disappears into a major data point like this until the algos explode it the way they want… this time a suspicious 'buyer' was always at the ready…
Is that the Fed? Circled area – shows buying liquidity didn't budge going into Chicago PMI. Very strange $ES_F $SPY pic.twitter.com/xgx6OH8Wcb
— Eric Scott Hunsader (@nanexllc) June 30, 2016
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