Chicago PMI in February 2016 Worst Since Late 2009

Monday’s economic calendar was not loaded up that high, but the Chicago Purchasing Managers Index (PMI) was released with a dismal reading of 47.6 on the headline report. Bloomberg had the consensus estimate at 52.9, and the January reading was at 55.6.

If this report looks weak to most investors and economists, it should — and then some. This was the lowest Chicago PMI since November of 2009.

What stood out here was that there was a drop in every component of the Chicago PMI. This included new orders, employment, production, backlog, price paid, inventories and deliveries. Yes, even employment.

The only caveat that may mute the impact of the sharp drop was that January’s number was unexpectedly much higher.
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Production and new orders were said to be the leaders lower in February. The ISM Chicago said:

Four of the five Barometer components declined between January and February, with only Supplier Deliveries posting an increase on the month. While the latest fall left the Barometer running a little below the 12-month average of 50.1, following significant weakness in Q4 2015, activity looks set to rebound in the first quarter.

The Barometer’s decline was led by an 18.5 drop in Production, which completely reversed January’s near 16 point gain, pushing it back into contraction. New Orders also fell sharply and Order Backlogs slipped further into contraction, a situation that has persisted for a year. Employment also declined significantly, leaving it at the lowest since November 2009 and the fifth consecutive month below 50.

Firms continued to drawdown stocks in February, with Inventories remaining in contraction for the fourth consecutive month. Prices paid contracted at a faster pace in February to stand at the lowest since July 2009 as oil and other commodity prices continued to fall.