Chicago PMI Signals Slower Business Activity

The Institute for Supply Management has released its Chicago Producers Manufacturing Index, or PMI. The Chicago Business Barometer for the month of September fell to 60.5, which came in lower than the Bloomberg consensus estimate of 62.0. Another negative was that the report is down handily from the 64.3 reading in August.

Accounting for this most recent fall, the average ended the third quarter at 59.1, which was down from the “weather boosted” 63.7 rate that was seen in the second quarter.

Surprisingly there was a sharp increase in stocks with firms that added to finished goods inventories, what appears to be the fastest pace since February, 1973. The feedback received from this survey was that firms were preparing for increased sales forecasts and a potential spike in unplanned orders.

Despite the fall in September, the reading is still above the level from the first quarter and above the 10-year average of 55.8. That may be of little comfort to economists looking for better data in current reports.

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The report went on to say:

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.

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