Chicago Business Barometer: Midwest Manufacturing Deep in Contraction

All Regional, National Manufacturing Activity in Contraction

The Chicago Business Barometer, the Institute for Supply Management-Chicago’s gauge of Midwest manufacturing activity contracted further to 42.9 in December, down from 48.7 the month prior. Wall Street expected a slight rise to 49.8.

“The steepness of the decline in the Barometer in recent months ends a particularly volatile year, which has seen orders and output move in and out of contraction,” Chief Economist of MNI Indicators Philip Uglow said. “It lends weight to the Fed’s gradual approach to tightening, with the flexibility to change direction if needed.”

The reading is the lowest since July 2009. Readings above 50 point to expansion, while those below indicate contraction. According to PPD reporting and projections, all regional and national manufacturing activity has slipped into contraction in what is a terrible sign for the sector in the year ahead.

“The only positive this month came from a special question with 55.1% of the panel expecting demand to be stronger in 2016 compared with 14.3% who thought it would be lower,” the report said. “30.6% of respondents thought demand would be unchanged.”

Translated by PPD: The ISM needed to make up a new question to find a silver lining in somewhere in the indisputably disappointing data to close out the year.