Chicago PMI drops in November

Economic activity in the Chicago area deteriorated more than expected in November due to a slowdown in new orders, according to data released on Tuesday.

The MNI Chicago business barometer fell to 61.8 from 68.4 in October, missing expectations for a reading of 67.0 and marking the lowest level since February.

Inventories rose 8.5 points to 59.6, the highest since Autumn 2018. Some firms reported stockpiling to get ahead of further supply chain disruptions and counteract logistical issues.

Meanwhile, order backlogs dropped 13.8 points to 60.8, six points below the 12-month average, as firms reported a reduction in the size of incoming orders.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said: "The drop in the Chicago PMI to a nine-month low is disappointing and stands in sharp contrast to the strength of the Philly Fed and Empire State indexes. But the Chicago measure is sensitive to swings in orders for Boeing aircraft - the company is based in Chicago - and orders have dropped in the past couple months, after a strong spring.

"The Chicago PMI and the national ISM manufacturing index often diverge month-to-month, but we can’t ignore this steep drop completely, so we are nudging down our forecast for tomorrow’s ISM by a point to 61, leaving it little changed from October’s 60.8. To be clear, 61 is still a very high reading by historical standards, leaving the index consistent with solid growth in output and, critically, capital spending."