Chicago Purchasing Managers, Prelude to Weak ISM

If you were wondering how long it would take for all the trouble in Europe to spill over into manufacturing orders, wait no longer.  It already has.  At least that is what the indication is via the old latest Chicago Purchasing Managers figures.  The adjusted index came in at 59.7 versus the Bloomberg consensus reading of 62.0 and versus 63.8 in April.  The numbers are all lower as well.

The April data showed that the New Orders Index fell to 62.7 from 65.2 in April.  The good news is that inflationary fears are going to be toast as the Prices Paid portion of the index fell down to 64.0 from 71.4 in April.  And employment, kiss the summer employment return goodbye if the Chicago measurement is representative of the nation.  The May Employment Index component dipped back under 50 with a reading of 49.2 versus the 57.2 reading in April.

The only component that grew is Supplier Deliveries with a reading of 65.1, a whole 0.2 points above 64.9 in April.  And that is not really a leading component of the index.

The good news is that the Midwest is only one region.  The bad news is that it is THE region used by economists to benchmark what is happening to the rest of Main Street America.  Sometimes the data is not as representative of the nation, but it is still used as a benchmark. That will likely drive down the ISM data due on Tuesday morning.

Bloomberg and other sources were already looking for a decline and some were likely anticipating a retreat even more due to the recent woes.  This may have just taken any last bit of steam coming from the bulls into the weekend.

JON C. OGG