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Economy in Brief

Chicago Purchasing Managers Index Reaches Highest in Nearly 7 Years
by Carol Stone, CBE  December 28, 2017

The Chicago Purchasing Managers Business Barometer for December rose 3.7 points to 67.6 from 63.9 in November. December's result was up 10 points from December 2016 and was the strongest reading since March 2011. A decline to 62.7 had been expected in the Action Economics Forecast Survey. Purchasing Managers' indexes are the diffusion type, where readings above 50 indicate growth and below 50, declines in activity; the farther above 50, the stronger the growth.

Based on these figures, Haver Analytics constructs an index that is comparable to the ISM Composite index. This figure increased from 63.7 to 65.9. During the last ten years, there has been a 63% correlation between the index and the q/q change in real GDP.

Month-to-month performance in the index components reflected strength in production, new orders and inventories and a modest gain in order backlogs. In contrast, the employment measure eased a bit, prices paid slowed somewhat and the supplier deliveries index was noticeably lower than in November.

New orders were the main driver of December's overall index gain. The percentage of firms with more new orders held steady at 46%, while the number with fewer orders decreased from 17% in November to 13%. These are not seasonally adjusted, so the resulting increase in the net number of firms with more orders was a better performance than generally occurs in December, pushing the seasonally adjusted new orders index to 72.7 from November's 63.2. Production was also more vigorous than usual seasonal patterns, so even though the number of firms increasing production fell to 47% from 54% and number with lower production increased to 8% from 7%, these were still the strongest months since mid-2014 and generated a seasonally adjusted December production index of 77.7, up from 70.1 in November.

Among the declining components, the drop in supplier deliveries may not actually suggest much weakness. That index (seasonally adjusted) was 68.5 in November, the highest since April 2004, and December's 59.2 is still in a high range.

Similarly, while the prices paid index eased to 66.1 in December from 68.5, that too is a high level and suggests only modest relief from mounting cost pressures. One-third of firms reported paying higher prices while a mere 2% of firms reported they paid lower prices in the month.

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 professionals 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. Summary data are contained in Haver's USECON database, with detail, including the ISM-style index, in the SURVEYS database. The Consensus expectations figure is available in AS1REPNA.

Chicago Purchasing Managers Index (%, SA) Dec Nov Oct Dec '16 2017 2016 2015
General Business Barometer 67.6 63.9 66.2 53.9 60.8 53.1 50.3
ISM-Adjusted General Business Barometer 65.9 63.7 60.2 53.0 59.1 52.0 51.6
  Production 77.7 70.1 69.5 58.3 64.3 54.7 52.5
  New Orders 72.7 63.2 69.9 56.9 63.6 55.7 50.4
  Order Backlogs 58.4 57.2 69.4 43.2 55.4 47.3 44.4
  Inventories 64.5 59.7 53.0 45.8 55.0 47.2 52.1
  Employment 55.3 57.1 46.7 49.8 53.0 49.4 50.3
  Supplier Deliveries 59.2 68.5 61.7 54.1 59.5 52.8 52.5
  Prices Paid 66.1 68.5 67.2 58.1 64.0 53.1 46.8
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