Chicago PMI Rises to 45.5 in February, Signals Slower Economic Contraction

The Chicago Purchasing Managers’ Index (PMI), released by the Institute for Supply Management (ISM) on Friday, climbed to 45.5 in February, up from January’s 39.5.

This marks the highest level since June 2024 and exceeded analysts’ forecasts of 41. While the increase reflects improving business conditions, the index remains below 50, signaling continued contraction in the Chicago region’s economy.

February’s rise represents the second consecutive month of improvement, driven by gains in key subcomponents. Production jumped 7.6 points, reaching its strongest level in eight months, while new orders increased by 5 points, reversing prior declines.

Supplier deliveries and order backlogs also improved significantly, with supplier deliveries rising 9.5 points after a sharp drop in January. Despite these positive developments, employment weakened further.

The employment sub-index fell by 1.5 points to its lowest level since June 2020, with nearly 40% of surveyed businesses reporting reduced staffing levels. This highlights ongoing challenges in the labor market even as other areas show signs of stabilization.

Another concern is rising input costs. The “prices paid” sub-index surged by 16.9 points—the largest monthly increase since July 1957—reaching its highest level since August 2022.

This sharp rise underscores mounting inflationary pressures that could impact businesses and consumers alike. The Chicago PMI has been below the neutral threshold of 50 for 15 consecutive months, reflecting persistent economic challenges in the region.

However, February’s reading suggests a slowing pace of contraction and potential stabilization in some sectors. This data offers valuable insights into regional economic trends and broader U.S. market conditions.

Investors and policymakers will closely monitor whether this momentum continues. However, inflation and weak employment could hinder recovery efforts in the months ahead.

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