Chicago Manufacturing Index Expected To Fall

WASHINGTON (AP) - Investors on Tuesday will look to a report on manufacturing activity in the Midwest for clues on whether companies are scaling back production in anticipation of weakening demand.

 

Wall Street expects the Chicago Purchasing Managers' Index to fall to 59 for July from 60.2 in June, according to the consensus estimate of Wall Street economists surveyed by Thomson/IFR.

 

The index, which measures business conditions across Illinois, Michigan and Indiana, is scheduled for release Tuesday morning. A number above 50 indicates growth.

 

Economist Jeoff Hall of IFR Markets, a unit of Thomson Corp., said that because the Chicago index includes service industry activity, it may give an inflated picture of regional manufacturing. Similar regional economic reports only include results from manufacturers.

 

Wall Street mainly uses the number to anticipate the Institute for Supply Management's national manufacturing report. That figure, due out Wednesday, is expected to show that U.S. productivity during July was even with last month at 56, according to the consensus estimate of Wall Street economists surveyed by Thomson/IFR. A number above 50 indicates that manufacturing is expanding.

 

The ISM number has grown steadily in recent months from a score of 49.3 in January as manufacturers ramped up production after eliminating excessive inventory. A slower growth rate for July would suggest companies have realigned production with their sales and are waiting to gauge future demand.

 

''The inventory correction appears to be over and now you're getting into a situation where future demand is in question,'' said Hall. ''Until a few weeks ago I'd say things were fine, but with ongoing credit concerns we may see a slow down in inventory accumulation.''