Chicago Businesses Boom for Second Consecutive Month

A new report points to solid growth in the Windy City.

Feb 28, 2014 at 2:44PM

The Chicago economy in February celebrated its second month of steady growth, according to a new Chicago Business Barometer report (link opens a PDF) released today by the Institute for Supply Management (ISM).

After clocking in at 59.6 for January, February's index added another 0.2 points to hit 59.8. Analysts had expected a more modest growth reading of 56.4. 

The ISM creates its index from surveys of purchasing and supply chain professionals based in Chicago. An above-50 rating indicates expansion, while below 50 implies a contraction from the previous month. Although the geographic focus is limited to the Chicago area, investors keep tabs on the index as a leading indicator of U.S. economic activity. 

According to the report, this month's consistent growth is mostly due to a double-digit gain in the Barometer's employment component. A major improvement in the labor market was enough to keep things pointing positively, despite slowdowns in the new orders, production, and order backlogs components.

The report said some participants "cited the negative effect of the poor weather on their business, although overall this appeared to have a minor impact that was only visible in longer supplier lead times."

According to Philip Uglow, chief economist for MNI Indicators (an ISM partner): "The latest Chicago Report confirms that the U.S. economic recovery continued in February, with New Orders and Production remaining at high levels. In line with the pick-up in demand, firms continued to rebuild inventory and just over 50% of respondents said they planned to increase stock levels over the next three months."

This month's details proved slightly confusing, since labor market improvements are usually coupled with long-term growth opportunities. But slower growth for new orders means that's not necessarily the case. Overall, however, investors can be happy that Chicago businesses made it through tough weather with nothing much to worry about.

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