Chicago PMI Unexpectedly Rises, But Mix Doesn't Look Sustainable

The Chicago Purchasing Manager's Index for June unexpectedly improved to 49.6 from 49.1 in May. The market had looked for a decline to 48. So, while the index remains in contractionary territory, it is near breakeven at 50. for comparison, the index averaged 54.4 in 2007. The weakening dollar is helping to keep export demand growing as the the domestic economy slows. The breakdown of the components doesn't look as strong as the headline. Declines were seen in production to 45.1 from 51.5, and new orders to 52 from 56.1, and order backlogs to 42.3 from 46.8. Improvement was seen in prices paid which eased down to 85.5 from 87.5. and employment which rose to 46.7 from 41.2. Inventories also rose to 50.5 from 42.2, suggesting slowing production in the future to work off excess supplies. The national ISM, due out tomorrow, is expected to remain weak.