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MIDWEST MANUFACTURING GROWS UNEXPECTEDLY LESS CLOUDY

Midwest factory activity contracted at a shallower-than-expected pace this month.

MNI Indicators' Chicago purchasing managers' index USCPMI=ECI gained 2.1 points to print at 47.6, contrary to the 1-point decline analysts anticipated.

A PMI reading below 50 indicates monthly contraction, and with one exception, Chicago PMI has languished south of that level since August 2022.

High interest rates, rising input costs and the uncertainties surrounding President Donald Trump's erratic tariff policies have been headwinds for the manufacturing sector in recent months.

An 8.8% increase in production, to the highest reading since December 2023, drove the upside surprise "with smaller increases in employment, order backlogs and new orders also contributing" to the aggregate improvement, the press release says.

Prices paid - an inflation predictor - eased a tad.

On the downside, inventories (a drag on fourth-quarter GDP) dropped 6.5 points to the lowest the subindex has been since March 2020.

Survey participants were asked to choose from a list of precautions they've taken due to potential tariff increases over the coming months.

The four top answers were "increasing prices" at 35%, "considering new suppliers" and "increasing inventories" both garnering 22%, and "potential on-shoring" at 18%.

While regional PMIs are more volatile than national readings, they tend to march in the same general direction.

Tomorrow, the Institute for Supply Management (ISM) is due to release its more closely watched national PMI, which is seen dipping just below 50 after enjoying two rare months in expansion territory, albeit barely.

(Stephen Culp)

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