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Unexpected Chicago PMI in Contrast with Regional Fed Surveys: A Detailed Look

Perhaps something odd is going on over there at the Institute for Supply Management. The Chicago PMI is starkly in contrast with the regional Fed surveys (think Philly, Empire, Richmond, Dallas, etc...) and we had that ISM number last month that was totally messed up. Some of the comments suggest this month was an aboration, such as forward ordering due an Oct 1 price increase. But anyhow... the Chicago PMI rose to 60.4 from 56.7 in August in contrast with expectation for a read of 56.0 or less seasonally adjusted. New orders rose to 61.4 from 55 in Aug. Interestingly order backlog fell to 49.1 from 56.2 in Aug. Inventories rose to 49.5 from 46.5 in Aug and employment fell to 53.4 from 55.5 in Aug.

Selected Comments from Chicago area Purchasing Managers...

1. Suppliers have cut staff so much there is no support team when a failure occurs, the response is slow, laborious and inadequate.
2. Tight raw material inventories both in-house and at suppliers are making planning very interesting. Conservative forecasts make this a prudent strategy but current skittish markets can either validate or wreak havoc upon it. Roll the dice.
3. Small business lending is picking up a little. Foreclosures on both Commercial and Residential properties are increasing. We are beginning to see an increase in people walking away from their mortgage obligations because of the decrease in the underlying values of their properties.
4. Just wondering how long this will last!
5. Look for consumer food prices to rise soon. Food manufacturers simply cannot continue to absorb commodity increases.
6. We have a price increase going into effect October 1st, which increases orders for September.
7. For our business, there is a lot of forward looking quotational activity, no new orders, but construction of projects which receive financial approval back in the Spring.

Full report from ISM...

Disclosure: No Positions