Chicago PMI Shoots the Lights Out

This morning's release of the Chicago PMI for February exceeded expectations and was the highest headline reading since 1987.  In addition to the multi-year highs in the headline index, many of the indicator's sub-indices also moved to multi-year highs.  For example, the new orders index rose to 75.9, which was the highest level since December 1983 and the sixth highest reading ever.  Additionally, the Production component rose to 78.2, which is the third highest reading in that index’s history.

One notable component that didn't hit a new high was the Prices Paid Index, which actually declined slightly this month.  As shown in the lower chart below, Prices Paid is still well below levels it has reached several times in the last decade.  While many investors are preoccupied with potential inflation pressures in the economy, it is interesting to note that in the seventeen months where the Chicago PMI headline reading exceeded 70, the Prices Paid Index for that month averaged a level of 85.6, which is 4.4 points above this month's reading.

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