Chicago PMI At Highest Levels Since Late '05

Orders and employment increased in January as U.S. companies expanded at the quickest pace in more than four years according to the Chicago Purchasing Managers Index results released on Friday.

The institute for supply Management-Chicago inc. said that the economic barometer climbed to 61.5, the highest level since November of 2005, and up from the 58.7 reported last month. Economists had expected a decline to 57.2 from 58.7 in December.

A reading above 50 represents that expansion is taking place.

The government stimulus packages spurred gains in the month allowing companies to ramp up output. Ford Motor Co. (NYSE: F) is leading the way for companies that are starting to hire employees again, and this will be a catalyst for spending in the coming months.

Ford has said it plans to spend nearly $400 million and create 1,200 new jobs at two Chicago plants to build a more fuel-efficient version of its full-size Explorer SUV.

The PMI gauge for orders climbed to 66.4 in January from 64.4 the previous month, with an employment measure of 59.8, up month-over-month from 47.6. This marks the highest level since April 2005.

The index's measure of production increased to 66.4 from 64.2, while the gauge on inventories jumped to 48.7 from 38.6, citing a slower pace of inventory reduction.

Manufacturing in the U.S. makes up 12 percent of the world's largest economy, and the Chicago PMI is a key gauge that economists look towards to gain a perspective on the overall health of the market.