The NAPM’s regional Chicago report is the first glance investors get of macro-level data for the month of February. The index showed a level of 47.9 versus 48.8 in January, both figures in what is considered contraction territory. The Chicago report, like the other 15 or so regional purchasing surveys, only cover limited geographic areas and don’t measure any hard data, but the signs of weakness in the beginnings of the supply chain are starting to appear. Especially concerning is the February survey reading for inventory at 54.5, up from 41.9 last month.
Some of the low figure for January could be related to year-end inventory drawdowns from ’06, but it is a scenario worth watching for further clarity. The markets don’t seem to be reacting too strongly to the report, but there’s a lot of other activity dominating traders’ mindsets today.
The full PMI will be out tomorrow, and as long as the markets are orderly today the PMI release should be well-covered and could move markets downward if they confirm the Chicago’s readings of inventory buildup and weak outlook. Later in the month we’ll get the Industrial Production & Retail Sales figures which will really start to fill in the supply/demand picture down to the consumer level.
Ryan Barnes
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