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Chicago PMI jumps to 65.9% in October

WASHINGTON (MarketWatch)
The Chicago purchasing managers index rose to 65.9% in October, to mark the best performance since March 2011
The increase was unexpected
Economists surveyed by MarketWatch had expected the Chicago PMI to dip to 54.5% from 55.7% in September
Any reading above 50 indicates expansion
The details were also strong
The production, new orders and order backlog indexes posted double-digit gains
Companies were seemingly unaffected by the government shutdown, according to the release
The gain in the headline index is the biggest in 30 years

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geniopolis.net dijo...

WASHINGTON (MarketWatch) — A key Midwestern manufacturing gauge jumped in October, indicating that companies may not have been as affected by the government shutdown as feared..

The Chicago purchasing managers index jumped to a reading of 65.9 in October, up from 55.7 and well ahead of the consensus of 54.5. Readings above 50 indicate expansion.

The October reading was the best since March 2011.

After the release of the Chicago PMI data — which subscribers get three minutes ahead of the public — Treasury prices turned mostly lower. The benchmark 10-year note /quotes/zigman/4868283/delayed 10_YEAR +1.02% yield , which moves inversely to price, rose a basis point on the day to 2.546% after hitting a low of 2.500%.

Manufacturing has been treading water since the summer.

Thomas Simons, money market economist at Jefferies & Co, said that the report was one of a handful of manufacturing indicators that have show signs of breaking out of the doldrums.

“We are optimistic about a recovery in the manufacturing sector in the second half of the year, and today’s release suggests our optimism is well placed,” Simons said.

Others were more skeptical and wanted to see more evidence of a pickup.

“We believe that the report may be exaggerating the extent of economic growth momentum,” said Millan Mulraine, director of research at TD Securities.

“A clearer picture will begin to emerge on the impact of activity from the shutdown with the release of the ISM manufacturing and payroll reports,” he said.

The internals of the Chicago PMI saw double-digit gains in many key categories.

Orders rose to 74.3, its highest level in nine years, from 58.9 in the prior month. Production jumped to 71.1 from 58.0, the best reading since February 2011.

Orders backlogs increased to 61.0 from 46.7, also its highest level since March 2011.

Employment also increased to its highest level since June.

Chicago is just one of several regional surveys and can be quite volatile, noted Jim O’Sullivan, chief U.S. economist at High Frequency Economics.

The national ISM index was up to 56.2 in September. Before the Chicago PMI, analysts had expected the ISM to soften a bit to 55.0% in October.

Cooper Howes, an economist at Barclays, said it has raised its forecast for the national ISM to 56.0 from 55.5 prior to the Chicago PMI.

“We have written in the past that the Chicago PMI tends to have the most predictive power of all the regional surveys when it comes to forecasting the manufacturing ISM, and a print of 56.0 would suggest that there was little slowdown in activity relative to the September print of 56.2,” Howe said in a note to clients.