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Economy in Brief

Chicago Purchasing Managers' Barometer Off Sharply
by Tom Moeller November 28, 2008

The Chicago Purchasing Manager's Association indicated that its November business barometer fell to 33.8 after the collapse during October. The latest figure was the lowest since early during the sharp recession of 1982. Consensus expectations had been for a reading of 37.3.

During the last ten years there has been a 67% correlation between the business barometer and the three-month change in US factory sector industrial production. There has been an 85% correlation between the Chicago figure and the national ISM index (due for release tomorrow) and that is the highest correlation of all the regional series with the national ISM index.

The new orders sub-index fell to 27.2, the lowest since 1980, and the index level is off by roughly one-half during just the last two months. Order backlogs also fell sharply. The production series ticked slightly after having more-than halved during October.

The employment index, at 33.4, was near its lowest level since the last recession. During the last thirty years there has been a 72% correlation between the level of the employment index and the three-month change in nonfarm payrolls. 1

The prices paid index fell further after having declined sharply during October. The current index level of 50.7 is nearly half the July high. During the last ten years there has been a 55% correlation between the price index and the three-month change in the finished goods PPI.

The Mortgage Meltdown, Financial Markets, and the Economy from the Federal Reserve Bank of San Francisco can be found here.

Chicago PMI  November   October September November '07 2007 2006 2005
Chicago PMI Business Barometer Index 33.8 37.8 56.7 53.6 54.4 56.8 60.4
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