Econintersect: The Chicago Business Barometer declined 2.5 points after decling 5.4 points last month but increasing 5.7 points the previous month. The authors of this index believe the growth this year is "solid".
The market expected the index between 57.0 and 63.8 (consensus 60.8) versus the actual at 58.3. A number below 50 indicates contraction. From the authors of the index:
It was a disappointing end to to the year with the pulse rate of our business panel slowing noticeably in December. The trend, however, remains solid and consistent with continued growth in the US economy.
The Chicago Business Barometer fell 2.5 points to a five month low of 58.3 in December as Production and both ordering components expanded at the slowest pace since July. The slowdown in the pace of activity exhibited since October’s one year high of 66.2 has been marked, although the Barometer averaged 61.8 in Q4, a little higher than the 59.1 seen in Q3. For 2014 as a whole the Barometer put in the best performance in three years, averaging 60.8 compared with 56.1 in 2013 and 54.6 in 2012.
The softening in business activity in December was led by a 5.1 point fall in Production to a still healthy pace of 61.6. Production has run above 60 for five months in a row, while New Orders at just below 60 suggests continued firm growth in the US economy. Overall, four of the five components that comprise the Barometer fell in December. Only Employment increased, reversing nearly half of November’s fall. Order Backlogs was the biggest concern for future expansion as it dipped into contraction following November’s softening in orders.
In the previous three months, companies built stocks sharply in anticipation of a strong December, and ahead of the winter season. There was a sharp downward correction in December, with the Inventories Indicator falling to the lowest since April. Some firms said they expected a further decline in Q1. Inflationary pressures eased for the third consecutive month as Prices Paid declined to the lowest since April, following the plunge in oil prices to below $60 per barrel in December.
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