Volatility in the ISM Chicago Report (more widely known as the Chicago PMI) continues this month with a dip to a five-month low index reading of 50.6, barely above contraction.


The MNI Chicago Business Barometer fell 3.6 points to a five-month low of 50.6 in October from 54.2 in September, suggesting economic activity in the US lost some momentum having picked up in Q3.

The Barometer decline was led by a slowdown in Production, which fell 5.4 points to 54.4, giving up most of the gain seen last month but remaining above the 2016 average. New Orders also subtracted from the Barometer, falling to the lowest level since May. Order Backlogs increased slightly, but failed to jump out of contraction territory, where they have been over the past three months. Employment saw a smaller rise, edging back above the 50-breakeven level and recovering some of the lost ground experienced in the previous month. Meanwhile, Supplier Deliveries fell to the lowest level since June.

Companies decreased their stock levels at the fastest pace since May 2016, with the Inventories Indicator slipping back into contraction in October. Prices Paid rose to the highest level since November 2014, following the recovery in the oil price and panellists also reported higher prices for steel.

“A key takeaway from the latest survey was the pick-up in Prices Paid to a nearly two-year high. Inflationary pressures are on the rise, which is one of the metrics the Federal Reserve has been waiting for to increase rates. However, economic growth ahead, as read by the October Chicago Business Barometer, looks very disappointing. Hopefully, it doesn’t mark the start of a downward trend,” said Lorena Castellanos, senior economist at MNI Indicators.

ISM Chicago is a compilation of both manufacturing and service firms. Readings above 50 indicate expansion.

This series is quite volatile, but may indicate a dip in future ISM readings.

Mike Mish Shedlock