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The Chicago Purchasing Managers Index (PMI) (also called the Business Barometer) for the month of December rose from 50.4 in November to 51.6, the third consecutive monthly increase. A reading above 50 indicates expansion, and economists had been expecting a reading of 51 for December.

The weakest part of this month’s reading was the employment index, which came in at a seasonally adjusted rate of 45.9, down from 55.2 last month, and a three-year low. On the plus side, new orders rose to a 19-month high of 54, sharply higher than the 45.3 reading in November.

The production index fell from 54.7 in November to 53.8 in December, while the prices paid index contracted sharply, from 70.1 in November to 61.7.

Among the ISM panel’s comments:

• We have more work than we have people to do build it, nice problem to have, except most of what we have needs to ship before the end of the year, backlog into 2013 is looking strong!
• We were forced to reduce staff this month because of weak order intake.
• Business borrowing remains relatively slow. Credit is difficult to obtain or is relatively expensive for all but the most economically healthy borrowers.
• We are on a hiring freeze in Q4, waiting to assess the outcome of the fiscal cliff deliberations.
• We are also planning cutbacks due to increased healthcare costs and Obamacare related expenses.

The Chicago PMI report is available here.

Paul Ausick