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Chicago Purchasing Managers Index decreased 7.5 points to 48.7 in November
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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 remaining three components of the Barometer remained broadly unchanged. Order Backlogs stayed in contraction for the tenth consecutive month while Employment and Supplier Deliveries increased slightly, pushing them a little more above 50.
The erratic pattern of stocks continued in November. Inventories fell sharply to below 50, having increased significantly in October. Underlying the softness in demand in November, 44% of panellists said that they thought their current level of inventories was too high, while 54% said that they were about right. Only 2% of the panel reported stock levels were too low, suggesting that a further inventory drawdown could depress growth.
Disinflationary pressures remained in November, as evidenced by the decline in Prices Paid, leaving it in contraction for the fourth consecutive month, a reflection of continued weakness in commodity prices.
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.”
Posted: November 30, 2015 Monday 09:45 AM