US Chicago PMI Unexpectedly Inches Higher, Yet Still Signals Contraction

Business conditions on the Chicago area improved more than expected during the month of May as PMI edged up to 49.1 from 48.3. A breakdown of index shows a surge in the prices paid component, as rocketing commodity prices are undoubtly pushing input costs higher. Given the pick up we’ve seen in US CPI figures in recent months, it appears that businesses are passing these costs on to customers. Meanwhile, production slipped lower, while new orders and the employment component rose. However, like the headline PMI reading, the employment index remains below the critical 50 mark, indicating contraction. As a result, it is far too soon to say this data indicates a recovery in business conditions. – Terri Belkas, Currency Analyst for DailyFX.com