Chicago Business Barometer Jumps To Highest Level In Over Two Years

(RTTNews) - Chicago-area business activity unexpectedly grew at a substantially accelerated rate in the month of October, according to a report released by MNI Indicators on Thursday.

MNI Indicators said the Chicago Business Barometer jumped to 65.9 in October from 55.7 in September, with a reading above 50 indicating growth in Chicago-area business activity. Economists had expected the index to edge down to 55.0.

With the unexpected increase, the business barometer rose for the fourth straight month to reach its highest level since March of 2011.

Philip Uglow, Chief Economist at MNI Indicators said, "The government might have shut down but Chicago area companies powered ahead in October as orders and production surged."

"While it is a little surprising to see such a large rise in activity, the consistent increase in the Barometer over the past four months suggests the recovery is gaining traction," he added.

MNI Indicators noted that the sharp jump by the Chicago Business Barometer reflected its biggest monthly increase in over 30 years.

The leap by the business barometer was partly due to a significant acceleration in the pace of growth in new orders, with the new orders index jumping to 74.3 in October from 58.9 in September.

The production index also showed a substantial increase in September, surging up to 71.1 from 58.8 in the previous month.

With the increases, the new orders index reached its highest level in nine years, while the production index rose to its highest level since February of 2011.

Additionally, the report showed a rebound by order backlogs, with the order backlogs index climbing to 61.0 in October from 46.7 in September.

The employment index also rose to 57.7 in October from 53.2 in September, although MNI Indicators noted that it remains well below the level of new orders and production.

On the inflation front, the prices paid index edged down to 56.7 in October from 57.1 in September, suggesting a slight deceleration in the pace of price growth.

Friday morning, the Institute for Supply Management is scheduled to release its report on national manufacturing activity in the month of October. Economists expect the ISM's manufacturing index to dip to 55.0 from 56.2.

Chris Low, chief economist at FTN Financial, said, "The Chicago PMI is more volatile than the national ISM, meaning tomorrow's ISM index likely won't be as strong."

"Nevertheless, the size of the increase in Chicago suggests surprisingly strong manufacturing growth despite the shutdown," he added.