Chicago Business Index Tops Estimates; Inflation Persists
Sep 30, 2008 Market Outlook
CHICAGO (Dow Jones)–A closely watched indicator of business activity in the
Chicago region showed higher-than-expected growth in September while pointing to
continued inflationary pressure.
Data released Tuesday by the Institute for Supply Management-Chicago also showed
that Chicago-area purchasing managers surveyed last week weren’t experiencing any
disruption in their normal course of financial management.
ISM-Chicago’s business barometer for September came in at 56.7, down from 57.9
last month, but well above the consensus estimate of 53.0 generated in a Dow
Jones Newswires survey of economists. Numbers above 50 indicate an expansion in
activity.
The prices paid component of the Chicago survey inched up to 80.7 in September
from 80.6 the month before, marking the seventh consecutive month that the
reading has surpassed 80.
“The bottom line is the ISM-Chicago business survey supports nothing worse than
slow or no real growth while bearing the weight of spreading inflation,”
ISM-Chicago said in a press release, adding that the special survey of purchasing
managers “does not support the concept of a ‘credit crisis.”‘
ISM-Chicago noted that 100% of respondents to its special survey on Sept. 23-24,
when asked if financial management had been disrupted since Sept. 15, responded
`no.’ Survey respondents ranged from small local firms to large global
businesses.
The data from ISM-Chicago come as investors look for signs that deteriorating
credit conditions are significantly slowing the broader economy. The failure
Monday by the U.S. Congress to pass a costly credit rescue package ignited the
worst one-day point drop ever for the Dow Jones Industrial Average, prompting
market participants to raise expectations that the rate-setting Federal Open
Market Committee will impose an emergency cut in the key short-term federal funds
rate.
The Chicago figures are closely watched because they are released the day before
a report on national manufacturing. The Institute for Supply Management is
scheduled to issue its September manufacturing index Wednesday at 10 a.m. EDT
(1400 GMT). The Dow Jones survey of analysts forecasts a 49.5 index for
September, from 49.9 in August. Readings below 50 indicate economic contraction.
Among key components of the Chicago survey to show an improvement in September,
the employment index increased to 49.1 from 39.2 last month and the production
component jumped to 71.4 from 63.4. Supplier deliveries were essentially flat at
55.0.
However, growth in new orders and order backlogs moderated significantly -
falling to 53.9 and 54.9, respectively - while the inventories component tumbled
to 37.7 this month from 52.2 in August.
“Firms may have ramped up production to fill order backlogs before they were
canceled by the customer,” ISM-Chicago said. “The drop in inventories is
consistent with management focused on such risk minimization.”
Overall, “the September survey painted a consistent story of weak, but solid,
business activity,” ISM-Chicago said.
The Chicago survey is compiled for ISM-Chicago by Kingsbury International.
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Tags: Business Barometer, Business Survey, Chicago Business, Chicago Region, Chicago Survey, Consensus Estimate, Credit Crisis, Dow Jones, Dow Jones Industrial, Dow Jones Industrial Average, Dow Jones Newswires, Federal Funds Rate, Federal Open Market Committee, Global Businesses, Inflationary Pressure, Institute For Supply Management, Market Participants, Open Market Committee, Purchasing Managers, Survey Respondents
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