The Chicago Business Barometer which recently has spent more time in contraction than expansion, declined but remained in expansion. This survey came in well below expectations.
Analyst Opinion of Chicago PMI
The results of this survey continue to agree with district Federal Reserve manufacturing surveys - and aligns with the overall trend of the ISM manufacturing survey. Still the decline this month was not expected.
From Bloomberg / Econoday, the market expected the index between 54.7 to 57.0 (consensus 55.2) versus the actual at 50.3. A number below 50 indicates contraction. Shaily Mittal, senior economist at MNI Indicators stated,
Business activity in the New Year got off to a slow start with contracting orders and easing production weighing heavily on hiring intentions. Activity in Q1 is usually weaker due to seasonal factors, so the following surveys will provide a better picture of business performance. Respondents to our survey did not expect to be affected by rate increases by the Fed in 2017. Although cost of capital is expected to increase, firms seemed to have already factored this into their purchase decisions."
The MNI Chicago Business Barometer fell 3.6 points to 50.3 in January from a previously revised 53.9 in December 2016, the lowest since May 2016.
Following a strong Q4, with the three-month average of the barometer at 54.3, the January reading made for a sluggish start to the first quarter of 2017. It was down 8.4% compared with January 2016's reading. Three of the five components of the Barometer decreased, with only Order Backlogs and Supplier Deliveries recording gains in January.
The slide in demand contributed the most to the Barometer's fall. New orders fell by 7.8 points, slipping into contraction territory, to the lowest level since December 2015. Growth in Production also eased, down 2.3 points to 56.0 in January. Order Backlogs rose but remained in contractionary territory. With lower orders and output, demand for labor fell. Employment remained below the break-even level for the third straight month. Supplier Deliveries lengthened, to the highest level since May last year.
z chicago pmi.png
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.
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