Chicago PMI Inches Up In June But Remains In Contraction Led By Inflation

Washington, D.C. (AHN) - Business activity in the U.S. Midwest region increased more than expected, but didn't give up its contraction in June.

The National Association of Purchasing Management (NAPM)-Chicago business index unexpectedly rose to 49.6, compared to 49.1 reading in May and 48.3 in April.

A reading of the index above 50 indicates that it is expanding, while a reading below 50 is a sign of overall business contraction.

The market analysts surveyed by Thomson's IFR Markets have been projecting the business activity index to decline to 48.0 in the month of June.

The index remained in contraction territory for the fifth straight month in the month of June, according to a survey of corporate purchasing managers released on Monday.

Even after the index edged up, the market analysts are estimating the reasons of the continued contraction of the index due to decline in production activity and the nationwide rise in costs.

The Chicago purchasing managers group indicated that the prices paid index dropped to 85.5 in June, which has been hoavering near 80 mark since the start of this year, compared to the rise to 87.5 in May and 82.9 in April.

The retreat in the prices-paid index indicates that almost every business is paying higher input costs this month.

The report showed the new orders index declined to 52.0, compared to 56.1 in May and 53.0 in April in the Chicago region, while the employment index have risen this month to 46.7 in June, compared to 41.2 as last month's reading.

However, the production index dropped to 45.1 in June, from 51.5 in May and 53.0 in April, after it increased for the first three consecutive months in 2008. The index reported is its lowest reading in more than seven years.