The Chicago Purchasing Managers Index, also called the “Business Barometer,” rose from 50.4 in November to 51.6 in December, denoting business activity in the region increasing for the third consecutive month. Any reading above 50 indicates expansion. The index has by “lumbering along since September’s 3 year low,” according to today’s report by the Institute for Supply Management.
Economists were expecting the Chicago PMI to nose upward to 51.0 for December.
New orders climbed to 53.8 from 45.3 the month prior, representing their biggest advance in 19 months, to pace the Business Barometer higher. Although still showing increased activity, production slipped from 54.7 in November to 53.8 in December. Order backlogs contracted for the fifth straight month, dropping 2.7 to 46.9 in December. Employment was a heavy drag on the overall reading with a plunge from 55.2 in November to 45.9 in December, its lowest level in three years. The employment nosedive is reflective of the caution of employers to increase their workforce with the drop-dead date for the fiscal cliff rapidly approaching (t-minus 3 days now).
As typical, select comments from survey panelist that provide perspective on the overall business condition are provided with the ISM report. The anonymous comments generally cover both sides of the spectrum. Of particular note:
“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.”
“Business borrowing remains relatively slow. Credit is difficult to obtain or is relatively expensive for all but the most economically healthy borrowers.”
“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!”
Overall, the comments for December carried a relatively somber attitude from panelists with concerns about forecasts for the new year, taxes and smaller orders being mentioned.
The Chicago PMI data beat the consensus predictions of economists, much like initial jobless claims did yesterday pending home sales did this morning, but Wall Street largely continues to remain focused on the fiscal cliff. The Dow Jones is heading for it fifth straight losing day, following Thursday’s touching of the lowest level since December 5. Standard & Poor’s 500 Index and the Nasdaq are on the same path for consecutive sessions of closing lower than the prior day.