November 2015 Chicago Purchasing Managers Barometer New Orders Fall Sharply To Lowest Since March

The Chicago Business Barometer significantly declined and now is in contraction. This index is now wildly gyrating.

From Bloomberg, the market expected the index between 52.8 to 56.5 (consensus 54.0) versus the actual at 48.7. A number below 50 indicates contraction. Chief Economist of MNI Indicators Philip Uglow said,

That the Barometer was unable to hold on to the gain seen in October is a reflection of the erratic pattern of demand seen throughout 2015. The slowdown in the global economy, the strong dollar and decline in oil prices have all impacted businesses this year to varying degrees.

While it looks likely that the Fed will begin to raise rates in December, the latest setback supports the case for a gradualist approach to monetary tightening.

From ISM Chicago:

The Chicago Business Barometer decreased 7.5 points to 48.7 in November from 56.2 in October, as a sharp fall in New Orders put it back into contraction for the sixth time this year. The significant decline in the Barometer is indicative of the see-saw pattern of demand seen in 2015, with output and orders shifting in and out of contraction. The November fall also suggests that activity over the final quarter of the year may well decelerate barring a bounceback in December. New Orders fell 15.3 points to 44.1 in November from 59.4 in October, leaving it at the lowest level since March. Production also fell sharply, although managed to hold just above the neutral 50 level that separates expansion from contraction.

The From ISM Chicago 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.