Chicago businesses crushed expectations in June.
After slipping back into contractionary territory in May, the measure of Midwest activity spiked to 56.8 in June, demolishing economists expectations of 51.0, according to data from Bloomberg.
The ISM’s MNI index, also known as Chicago PMI, has been choppy over the last half year, frequently dipping below the 50-level that separates expansion and contraction of the sector.
The surprisingly strong reading led to skepticism. Millian Mulraine, deputy chief US macro strategist at TD Securities, sent a note to clients telling them to “fade the inexplicable strength in Chicago PMI.”
“The overall tone of this report was quite encouraging, and the accompanying upbeat performance in the forward-looking indicators suggests that the positive momentum will be sustained in the coming months,” said Mulraine.
“Nevertheless, given the very volatile performance of this series over the past few months and the less than stellar track record in gauging overall manufacturing sector performance, we will continue to fade this report’s strength and instead see it as just another factor pointing to upside risks to our above-consensus call for a modest rise in the ISM manufacturing indextomorrowfrom 51.0 top 51.7.”