Chicago Business Barometer Unexpectedly Climbs To Seven-Month High

(RTTNews) - With demand strengthening as the economy continued to recover from the weather-related slowdown, MNI Indicators released a report on Friday showing that its reading on Chicago-area business activity unexpectedly rose to a seven-month high in May.

MNI Indicators said its Chicago business barometer climbed to 65.5 in May from 63.0 in April, with a reading above 50 indicating an increase in activity.

The increase surprised economists, who had expected the barometer to dip to 61.0. The unexpected increase lifted the Chicago business barometer to its highest level since last October.

Philip Uglow, Chief Economist at MNI Indicators said, "It looks pretty clear now that the slowdown in Q1 was due to the poor weather, with activity now back to or exceeding the level seen in Q4."

"The rise in the Barometer to a seven month high in May suggests we'll see a significant bounceback in GDP growth this quarter following the contraction in Q1," he added.

MNI Indicators said the order backlogs index spiked to a three-year high, reflecting companies playing catch-up to make up for lost output.

The increase by the barometer also reflected a mild expansion in new orders and a slight lengthening in supplier lead times.

On the other hand, MNI Indicators said the production index dipped in May following a sharp increase in April, while the employment fell slightly to below the average over the past twelve months.

The firm also said the prices paid index experienced its largest monthly gain in nearly five years, reflecting price increases from suppliers and higher prices for oil-related products and machinery and equipment wholesaling.