ISM-Chicago Data Suggest Contracting Activity in September

By September 28, 2012Economy

The Chicago Business Barometer from ISM-Chicago and Deutsche Börse declined from 53.0 in August to 49.7 in September. This is the first time the ISM-Chicago composite index has fallen below 50 – its threshold for contracting activity – since September 2009. Indeed, the Barometer has been on a steady decline since February, when it peaked at 64.0.

As with many other regional manufacturing surveys, the index was led lower by falling sales. The index for new orders dropped from 54.8 in August to 47.4. The order backlog was also contracting. Meanwhile, production continues to grow modestly, but the growth rate has eased; the production index was down from 57.4 to 55.4. Employment growth was also slower, with capital spending plans decelerating, as well.

Many of the sample comments provided with the survey results tend to echo frustrations with the economic and political landscape. For instance, one respondent said, “Overall uncertainty with respect to government policies continues to make us hesitant to make significant investments in new areas.” Another one added, “2012 drought, election year, recent change in Gulf weather all play into short term and long term prices of materials.” Still, even with comments related to some anxieties and rising raw material prices, others were more positive. One individual noted, “It seems that companies are starting to move forward again. Projects that have been on hold are again being discussed.”

The ISM-Chicago is often looked to, in addition to other sentiment surveys, as a precursor to the larger purchasing managers’ index from the Institute for Supply Management (ISM). The ISM figure will be released on Monday, and it is expected to remain below 50. If true, it would be the fourth consecutive month of contracting activity nationally. Either way, the manufacturing sector continues to struggle with reduced new orders, slowing global economies, and uncertainties related to the U.S. election and future fiscal policies.

Chad Moutray is chief economist, National Association of Manufacturers.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM), where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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