Markets & Finance

Manufacturing: Another Distress Signal


The Chicago Purchasing Managers' industrial-activity index, a survey of conditions in the Midwest, dropped to 48.1 in September from 54.9 in August. This left the index at the lowest level since January, 2002. The decline was much worse than expected, and will further contribute to market fears that economic strength is deteriorating.

We at MMS International would caution, however, that the Chicago PMI tends to be influenced by the auto sector more than the national Institute for Supply Management (ISM) report. As such, the strength seen in August and the larger-than-expected pullback in September could be more of an auto story than developments in the factory sector at large.

Indeed, the picture should become clearer on Tuesday, Oct. 1, when September updates for both the national ISM index and auto sales are released. If both of these reports show a large deterioration as well, and the employment data are weak on Friday, Oct. 4, that could prove to be all the evidence that the Federal Reserve needs to pull the trigger on another interest-rate cut.

As for some of the key components of the Chicago report, new orders dropped to 49.2 from 55.8, production slipped to 52.8 from 57.1, and employment improved to 46.6 from 44.6. On the inflation front, the prices paid component dropped to 57.6 from 63.6. The recent dip in this component is consistent with the view that inflation will not be a problem anytime soon.


The Good Business Issue
LIMITED-TIME OFFER SUBSCRIBE NOW

Sponsored Financial Commentaries

Sponsored Links

Buy a link now!

 
blog comments powered by Disqus