The Chicago Business Barometer from ISM-Chicago and Deutsche Börse declined from 52.4 in March to 49.0 in April. This is the lowest value for the index since 2009, with the report indicating that manufacturing activity in the region contracted for the first time in 3½ years. As such, it stands in contrast to the Midwest Manufacturing Index from the Chicago Federal Reserve Bank, which was released yesterday and found production levels moving higher in March. It is consistent, though, with several of the other regional manufacturing surveys of late which have reported slowing in the sector.

For the ISM-Chicago report, production helped to drive the larger index lower. To illustrate the slowing of activity in this data, the index for production has fallen from 60.9 in January to 51.8 in March to 49.9 in April. The April reading indicated a slight contraction for the month, with manufacturing activity essentially stalled. Employment also declined, with its index dropping from 55.1 to 48.7. This was the first pullback in hiring since December.

On the positive side, new orders edged marginally higher for the month, up from 53.0 in March to 53.2 in April. This figure was still well-below the 60.2 reading of February. The good news is that inventory and order backlog levels continue to diminish. This should mean that activity should pick up on stronger sales data, with stockpiles so low.

Chad Moutray is the chief economist, National Association of Manufacturers.

The Institute for Supply Management-Chicago and Deutsche Börse reported that its Chicago Business Barometer edged higher from 49.9 in October to 50.4 in November. While this suggests a minor expansion in manufacturing activity in the region, the various subcomponents provide mixed comfort.

Production rose from 51.8 to 54.7, and employment increased from 50.3 to 55.2. Both of these figures represent a nice improvement, with modest growth in output and hiring lifting the sector from the near-stalled levels seen in the month before. Much of the advancement stemmed from progress in the auto industry. At the same time, the pace of new orders slipped back into contraction (from 50.6 to 45.3). To the extent that sales are a proxy for future activity, this could mean that the gains seen in November might be temporary.

Indeed, the sample comments tend to highlight the anxieties of Midwestern manufacturers. One respondent said, “Business sales been slowing throughout the year, and continue to slow, but now at an increasing rate, becoming very alarming.” Another specifically noted concerns over the fiscal cliff. Even with these sentiments, however, other manufacturers were more cautiously optimistic about output next year, with at least one of them experiencing strong demand right now.

Chad Moutray is chief economist, National Association of Manufacturers.

The Census Bureau reported that new orders for manufactured goods rose 2.8 percent in July, reversing the 0.5 percent decline in June. A strong increase in transportation sales lifted durable goods orders by 4.1 percent, outpacing the 1.5 percent gain from nondurable goods.

Illustrating the impact of higher motor vehicle and nondefense aircraft orders on this figure, manufacturing new orders would have risen by just 0.7 percent without these sectors. This was noted a week ago when advanced data for durable goods was released.

The strongest sector for new orders in July was primary metals, which was up 2.9 percent. Most of the other major sub-industries were lower, including machinery (down 4.1 percent), electrical equipment and appliances (down 2.2 percent), fabricated metal products (down 0.8 percent), furniture and related products (down 0.4 percent), and computers and electronic products (down 0.2 percent).

Meanwhile, shipments of manufactured goods increased 2 percent in July. As with new orders, the bulk of this gain stemmed from transportation, which jumped 8.6 percent. Other leading sectors for shipments were beverage and tobacco products (up 3.7 percent), apparel (up 2.3 percent), petroleum and coal products (up 2.3 percent), chemical products (up 1.7 percent), primary metals (up 1.3 percent), and computers and electronic products (up 1.1. percent). Note the large presence of nondurables in this list, which helped to lift nondurable goods shipments by 1.5 percent.

The other key data point released today came from the Midwest. The latest ISM-Chicago report found slower growth in the region, with its Business Barometer down from 53.7 in July to 53.0 in August. With that said, the various components were mixed. Order backlogs and supplier deliveries were both contracting at their slowest paces since the second half of 2009. Yet, there were improvements in production, new orders, employment, and capital equipment spending. Cost pressures appear to be accelerating, though. (continue reading…)

The Chicago Business Barometer from ISM-Chicago rose from 52.9 in June to 53.7 in July. This improvement was mainly due to a pickup in new orders, with the index increasing from 51.9 to 52.9. Still, this is a far cry from the 69.2 reading observed in February, which was followed by four consecutive monthly declines before July’s increase. 

Unfortunately, many of the other subcomponents of the ISM-Chicago survey mirrored weaknesses seen in other indicators. Current production, inventories, employment, and capital spending all grew at a slower pace in July.  The index for production, for instance, declined from 57.0 to 54.5.

The sample comments tend to echo this more-downbeat assessment. Many of the responses noted slower economic growth and rising uncertainties in the marketplace. While a couple of them observed higher sales, others tended to say that new orders were “erratic,” “softening,” “slower,” or “quiet.” In trying to explain the lower levels of activity, one individual said, “Summer vacations? Election year? Euro crisis? I wish I knew.” Indeed, these comments highlight the anxieties that we hear from manufacturers in other regions, as well.

Tomorrow, we will receive new data from the Institute for Supply Management’s national Purchasing Managers’ Index. In June, the PMI contracted for the first time since the official end of the recession. It will be interesting to see if the ISM-Chicago’s numbers foreshadow modest improvements, even as the larger picture remains weak.

Chad Moutray is chief economist, National Association of Manufacturers.