The Chicago PMI rebounded in October

The Chicago PMI jumped in October, reaching 56.2 after falling into contraction last month (48.7). The reading was much stronger than both consensus expectations (49.5) and forecast (49.0). The rebound was driven by a large rise in the production index (63.4, previous: 43.6) and considerable improvement in new orders (59.4, previous: 49.5). Prices paid fell further to 44.3, continuing to show weakness in manufacturing prices and in line with weakness in import prices and the low level of commodity prices. The employment index softened modestly, just barely staying in expansionary territory at 50.6 (previous: 52.3). This report followed on the heels of the ISM Milwaukee manufacturing report, which continued to show contraction (46.66).

Recent indicators of manufacturing activity have generally disappointed our expectations. The October print suggests that some of the recent weakness may be fading at least in the Chicago area. On Monday, we will receive the broader ISM manufacturing index, which will provide a better gauge of the likely trend in US manufacturing.

"We see ongoing weakness in US manufacturing for some time as past dollar strength continues to weigh on exports", says Barclays.