The Chicago Business Barometer in November plummeted 7.5 points to 48.7 and fully reversed its October rise. The latest equaled the lowest reading since May 2015 and was led by a sharp decline in new orders. The drop in the overall index to below 50 indicates a contraction in economic activity in the Chicago area this month. It was the sixth time this year that the index pointed to a contraction. Expectations in the Action Economics Forecast Survey called for a lesser decline to 54.1.

Haver Analytics calculates an alternative index that employs the methodology used by the Institute for Supply Management to construct its index of activity (to be released tomorrow). This figure declined 7.6 points to 49.3, the lowest reading since October 2009. During the last ten years there has been a 61% correlation between the Business Barometer and the q/q change in real GDP.

The 15.3 point decline in the new orders component to 44.1 left it at the lowest level since March. This weakening was followed by a 12.5 point drop in production to 50.9, but that still suggested a slight increase in activity. These declines were apparently linked to the shedding of inventories. The 12.2 point drop in the inventory index left it at the lowest level since June. Slight improvement was registered by other component series, notably employment which gained to 51.6, the third consecutive month above the break-even level of 50. During the last ten years, there has been an 81% correlation between the index and the m/m change in factory sector payrolls.

The prices paid component eased to 42.2 and remained near the lows of the economic expansion. Only 5 percent of respondents reported higher prices, near the record low. Twenty-three percent of respondents indicated lower prices.

The MNI Chicago Report is produced by MNI/Deutsche Borse Group in partnership with ISM-Chicago. The survey covers a sample of over 200 purchasing managers in the Chicago area with a monthly response rate of about 50%. The ISM-Adjusted headline index is calculated by Haver Analytics using these data to construct a figure with the ISM methodology. The figures can be found in Haver's SURVEYS database. The Consensus expectations figure is available in AS1REPNA.

Low Inflation in the United States: A Summary of Recent Research from the Board of Governors of the Federal Reserve System is available here.