Chicago PMI Unexpectedly Dives to Negative Territory; Production at Lowest Since July 2009; Emanuel’s Tax Hikes Will Make Matters Worse

Courtesy of Mish.

The Chicago PMI is in negative territory, plunging to 48.7 from a prior reading of 54.4 and a Bloomberg Consensus Estimate of 53.6.

Giant swings are common enough for the Chicago PMI which collapsed nearly 6 points in September to a sub-50 reading of 48.7. This indicates slight monthly contraction in the Chicago region’s composite activity.

New orders are below 50 as are backlog orders, the latter for an 8th straight month. Chicago-area businesses can’t rely on backlogs as much to keep up production which is also under 50 and at a 6-year low. Contraction in prices is deepening.

Recent History Of This Indicator

The Chicago PMI is expected to slow to 53.6 in September from 54.4 in August when delays in shipments gave the index a lift.

Production Plummets to Lowest Since July 2009 

Digging into to the Chicago PMI report we note Production Plummets to Lowest Since July 2009.

The Chicago Business Barometer declined 5.7 points to 48.7 in September as Production growth collapsed and New Orders fell sharply. The drop in the Barometer to below 50 was its fifth time in contraction this year and comes amid downgrades to global economic growth and intense volatility in financial markets which have slowed activity in some industries. The latest decline followed two months of moderate expansion, and while growth in Q3 accelerated a little from Q2, the speed of the September descent is a source of concern.

Three of the five components of the Barometer were in contraction in September with only Employment and Supplier Deliveries above the 50 neutral level. Production led the decline with a sharp double-digit drop that placed it at the lowest since July 2009. New Orders also fell significantly and both key activity measures are running well below their historical averages.

Economist’s Comment

Chief Economist of MNI Indicators Philip Uglow said, “While activity between Q2 and Q3 actually picked up, the scale of the downturn in September following the recent global financial fallout is concerning. Disinflationary pressures intensified and output was down very sharply. We await the October data to better judge whether this was a knee jerk reaction and there is a bounceback, or whether it represents a more fundamental slowdown.“

Get Me the Hell Out of Here

There is no need to wait to October to understand the trend. A fundamental slowdown is pretty obvious. Illinois and Chicago in particular have huge issues.

Illinois manufacturers are voting with their feet. As noted on August 13, in Get Me the Hell Out of Here

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