Chicago PMI: The Word Is 'Scary'

Here is a note that economists at Credit Suisse distributed on the Chicago PMI. In their opinion it is worse than scary.

CHICAGO PMI 37.8 Oct vs 48.0 consensus, 56.7 Sep
  New Orders 32.5 Oct vs 53.9 Sep
  Production 30.9 Oct vs 71.4 Sep
  Employment 41.5 Oct vs 49.1 Sep
  Inventories 56.5 Oct vs 37.7 Sep
  Prices Paid 53.7 Oct vs 80.7 Sep

Scary doesn’t do this report justice.  This abysmal report follows all other pre-ISM regional reports which carried the same tone - an abrupt change occurred in Oct.  The plunge in the headline index left it at the lowest level since the 2001 recession.  Demand side indicators collapsed. 

The 21.4 point drop in New Orders was the worst since the series began in 1968; the 40.5 drop in Production was the worst since its inception in 1946!  The excess supply signal has never been worse - the New Orders-Inventories spread was -24.0.  Price pressures eased rapidly - the 27.0 point drop in the Prices paid index was a record since 1946!

Comments

[investor88:]

Chicago PMI not a basis for birth of new bull market for sure. Some are saying bull this quarter, or next quarter or the quarter after the next - based on this and that historical study of past cycles, cash is trash in the long term etc. With data like this maybe premature to think of birth of new bull.

2008 Oct 31 10:06 PM

[fatcat:]

Purchasing managers are usually an accurate guide for upcoming activity...this hardly got a mention from the media.Sounds very ominous....

2008 Nov 01 09:27 AM

[OldLimey:]

Horrible.

investor88: I agree. I'm wondering whether the financial establishment and its media cronies were'nt out painting the tape for the mutual fund year end - with the added bonus that if they can get through to next week there might well be another kick higher on electoral certainty (whatever it turns out to be). No way of knowing, but the action looked pretty staged last week, even by 'normal' 2008 standards.

2008 Nov 01 10:33 AM

[peterthepai...:]

and the shape of the recession is L

2008 Nov 01 01:25 PM

[adan:]

beyond scary is right

i hadn't heard much of this til now either

many thanks!

2008 Nov 01 03:54 PM

[August9:]

stop looking at the current news. The media is myopic while stock prices aren't.tell me something about six to nine months from now when we'll be looking back and saying "coulda,woulda,shoulda...

2008 Nov 01 05:08 PM

[August9:]

Stop looking at the present.We all know the media is myopic and the stock markets are not.Tell me where we'll be six to nine months from now when the "gurus" will be saying "shoulda,coulda,woulda...

2008 Nov 01 05:13 PM

[whidbey:]

This a volatile series YOY, but for 2008 this 38 reading is 80% of the 2008 average, and it is a year like 2001 when the PMI read 38 in July.

As a rule, this series takes 12 months to move very much after stimulus starts. God knows how we count stimulus starts in 2008. Things have been done differently and no comparison of 2008 with 2001 is reasonable.

This could be "the low" reading in the next 12 months, but it portends nothing much to look forward to for the next year by way of improvement, no matter what is done. 2009 seems a lost year for the economy, however necessary to basing a recovery.

Now is the time for shopping for US stocks since the "E" is going to fall significantly this next year. This might give some nice bargains, much better than today. Keep some powder dry??

2008 Nov 01 08:47 PM