Fourth quarter GDP was revised lower today to 2.2 percent from 2.6 percent previously estimated.
Looking ahead, I think we are going to see some shocking downward estimates in the months to come. Meanwhile, a shocking PMI report came out today.
Chicago PMI Crashes to 5 1/2 Year Low
ISM Chicago reports Chicago Business Barometer At 5½-Year Low
The Chicago Business Barometer plunged 13.6 points to 45.8 in February, the lowest level since July 2009 and the first time in contraction since April 2013. The sharp fall in business activity in February came as Production, New Orders, Order Backlogs and Employment all suffered double digit losses, leaving them below the 50 level which separates contraction from expansion.
New Orders suffered the largest monthly decline on record, leaving them at the lowest since June 2009. Lower order intake and output levels led to a double digit decline in Employment which last month increased markedly to a 14-month high.
Disinflationary pressures were still in evidence in February, although the slight bounceback in energy costs pushed Prices Paid to the highest since December – although still below the breakeven 50 level. Some purchasers cited weakness in some metals prices including copper and brass, but others said suppliers were slow to pass along lower prices to customers.
Commenting on the Chicago Report, Philip Uglow, Chief Economist of MNI Indicators said, “It’s difficult to reconcile the very sharp drop in the Barometer with the recent firm tone of the survey. There’s some evidence to point to special factors such as the port strike and the weather, although we’ll need to see the March data to get a better picture of underlying growth.“
Blame it on the Ports
Everyone was quick to blame this on the ports and bad weather.
But the LA port issue has been festering for months. Weren’t economists aware of the ports? Of bad weather?
The reason I ask is the Bloomberg Consensus Estimate was 58.7. The range was 55.5 to 59.6. Who predicted 59.6?
Regardless, the actual number came in nearly 10 points lower than any forecast!
Surprise! Surprise! Surprise!
Link if video does not play: Gomer Pyle on Surprises.
Mike “Mish” Shedlock