Global| Nov 30 2005Chicago Purchasing Managers' "Business Barometer" Holds Up; Prices Accelerate to 26-Year High
Summary
The Chicago Purchasing Managers Business Barometer was 61.7 for November, down slightly from October's 62.7, but firmer than forecasts of about 60.0. This was the third straight reading above 60, a favorable performance after about [...]
The Chicago Purchasing Managers Business Barometer was 61.7 for November, down slightly from October's 62.7, but firmer than forecasts of about 60.0. This was the third straight reading above 60, a favorable performance after about six months of saw tooth behavior.
The new orders index, however, kept up the seesaw pattern, as it fell back 11.0 points to 61.6 after October's 9.2-point increase; the October advance, notably, was corroborated in yesterday's report of a 3.4% surge in the value of national durable goods orders in October. The Chicago production index eased 4.5 points, partially reversing its October gain. Employment fell by a point to 50.3, indicating a marginal expansion of factory jobs in the Chicago region. 
While the components describing real manufacturing activity portray a fairly optimistic picture, the index of prices paid may cause some worry. It rose once again, reaching 94.1, the highest since August 1979, when inflation in general was pretty rapid. This comparison, however, calls our attention to an important distinction in the Chicago and other Purchasing Manager surveys: these surveys count the number of firms reporting moves in a specific direction, not the magnitude of the move. Thus, many firms paid higher prices and fewer firms paid lower prices, but we have no idea how much those prices changed. Also note that the run-up in the overall index in fact resulted partially from a reduction in the number of firms paying lower prices, from 6% to 3%; as recently as August, this deflationary factor was 11% and 16% in May. The number of firms paying higher prices represents 67% of the total, a high figure, but not so dramatic as in earlier inflation periods and not even as high as several readings last year in the mid-70s.
| Chicago Purchasing Managers Index, SA | Nov | Oct | Oct '04 | 2004 | 2003 | 2002 |
|---|---|---|---|---|---|---|
| Business Barometer | 61.7 | 62.9 | 67.7 | 62.9 | 54.6 | 52.8 |
| New Orders | 61.6 | 72.6 | 79.7 | 67.0 | 58.0 | 56.2 |
| Prices Paid | 94.1 | 79.6 | 84.7 | 80.1 | 55.8 | 56.9 |
Carol Stone, CBE
AuthorMore in Author Profile »Carol Stone, CBE came to Haver Analytics in 2003 following more than 35 years as a financial market economist at major Wall Street financial institutions, most especially Merrill Lynch and Nomura Securities. She has broad experience in analysis and forecasting of flow-of-funds accounts, the federal budget and Federal Reserve operations. At Nomura Securites, among other duties, she developed various indicator forecasting tools and edited a daily global publication produced in London and New York for readers in Tokyo. At Haver Analytics, Carol is a member of the Research Department, aiding database managers with research and documentation efforts, as well as posting commentary on select economic reports. In addition, she conducts Ways-of-the-World, a blog on economic issues for an Episcopal-Church-affiliated website, The Geranium Farm. During her career, Carol served as an officer of the Money Marketeers and the Downtown Economists Club. She has a PhD from NYU's Stern School of Business. She lives in Brooklyn, New York, and has a weekend home on Long Island.
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