Econintersect: The Chicago Business Barometer decreased 3.8 points to a still robust 60.5 in September, as Production and New Orders slowed while firms reported a record rise in stocks and a sharp increase in input prices.
The market expected the index between 59.0 and 65.4 (consensus 62.0) versus the actual at 60.5. A number below 50 indicates contraction. From the authors of the index:
With the latest fall, the Barometer ended Q3 at an average of 59.1, down from the weather boosted 63.7 rate seen in Q2, but still showing the US economy is growing at a healthy clip.
There was a surprisingly sharp increase in stocks with firms adding inventories of finished goods at the fastest pace since February 1973. Feedback suggested firms were preparing for robust sales forecasts and potential spikes in unplanned orders.
Despite September‘s fall, the Barometer stands above Q1‘s level and the 10-year average of 55.8, with respondents deeming activity levels as ”strong“ and “surging“, aided by ongoing demand, successful sales promotions and organic growth, all of which called for inventory builds.
The three ordering components fell back after strong readings in August. Production and New Orders, however, remained firm around 60, while Order Backlogs stood above 50 for the second consecutive month. A number of respondents reported that September’s slight slowing was expected to be temporary as businesses reported strong bookings through the end of October
In contrast, Employment and Supplier Deliveries contributed positively to the Barometer, with the latter lengthening to the longest since April 2011. There were tentative signs that demand pressures are starting to put some upward pressure on prices. In spite of the recent fall in oil prices, Prices Paid increased to the highest level since November 2012. Commenting on the Chicago Report, Chief Economist of MNI Indicators said, ”Activity levels remained buoyant in September and point to continued firm economic growth. Moreoever, the record pace of stockbulilding suggests firms are increasingly confident that things will keep improving.“
The Chicago ISM is important as it is a window into the national ISM reports which will be issued shortly. When you compare the graph below of the ISM Manufacturing Index against the Chicago PMI (graph above) - there is a general correlation in trends, but not necessarily correlation in values.
source and read the full report: Chicago PMI