The National Association of Purchasing Management - Chicago compiles a survey and a composite diffusion index of business conditions in the Chicago area. Manufacturing and non-manufacturing firms are both surveyed, but until recently, market players have believed that the survey primarily covers the manufacturing sector. Readings above 50 percent indicate an expanding business sector. The NAPM - Chicago is considered a leading indicator of the ISM manufacturing index. Why Investors Care
| Released on 10/31/07 For Oct 2007 | ||||||||||||
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Highlights
Volatility once again hit the Chicago purchasers report where readings swung wildly into the negative column. The overall index fell 4.5 percentage points to 49.7. Production was further below the break-even 50 level at 46.9 -- down more than 11 points from September! Backlog orders showed a nearly 12 point downswing to 39.9, but new orders were an important positive in the report showing only a 2.3 point dip to a 53.9 level that is still consistent with healthy growth.
But most other readings were negative including a 2.5 point dip in the employment index to 49.5 and, especially bad for the inflation outlook, a nearly 16 point surge in the prices paid index to 74.7. This reading is among the very first to reflect pressures now underway in the oil market, a factor for instance that precedes the price data in this morning's third-quarter GDP report.
In a likely positive, inventories jumped nearly 12 points to a 49.6 level that suggests purchasers have stopped liquidating stocks. Unless the inventory reading is skewed by statistical noise, it suggests that purchasers, perhaps because of the resilience in new orders, believe inventories are in line with the outlook for demand.
There wasn't much reaction to the report as markets await this afternoon's FOMC statement. But the report, however volatile, is pointing to slowing conditions and rising price pressure.
The NAPM-Chicago purchasing managers' index was steady and moderate coming in at 54.2 in September vs. 53.8 in August. New orders dipped back a bit but remain a highlight of the report, at 56.2 vs. 58.4. Backlog orders, which contracted steeply in August, showed month-to-month improvement in September at 50.5 (note a 50 reading indicates no month-to-month change). Production is strong at 58.3 vs. 55.7.
NAPM-Chicago Consensus Forecast for October 07: 53.5
Range: 50.1 to 56.0
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The NAPM-Chicago Survey registers manufacturing and non-manufacturing activity in the Chicago region. Investors care about this indicator because the Chicago region mirrors the nation in its distribution of manufacturing activity. Consequently, the NAPM-Chicago survey often moves together with the ISM index, but is reported one day in advance. |
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