Chicago PMI drops less than expected in November

Economic activity in the Chicago area deteriorated less than expected in November, according to figures released on Thursday.

The MNI Chicago Business Barometer fell to 63.9 from October's six-and-half year high of 66.2, hitting its highest level in three months but slightly above economists' expectations for a reading of 63.0.

Output expanded at a robust rate this month as businesses continued to benefit from healthy domestic conditions and an abating of the disruption brought about by the recent adverse weather. Although new orders retreated from October’s four-month high, they remained in good health.

Jamie Satchi, economist at MNI Indicators, said: "Despite November’s fall, the MNI Chicago Business Barometer remains on track to deliver the first full year of expansion in three years. Firms seem to have navigated through the worst of the bad weather conditions in recent months, though supplier deliveries rising to a thirteen-year high and persistent, high input costs suggests the effects are yet to fully dissipate away."

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said a correction was always likely after two very high readings, but this is still an elevated level for the Chicago PMI.

"It is consistent with a small decline in tomorrow's national ISM manufacturing index, as implied by other regional surveys too. But we don't regard this as evidence of a real softening in the industrial economy; all these data are noisy in the short term. With business capex picking up and global growth very strong, we
see no reason to expect a slowdown in manufacturing. Solid gains in output over the next few months are a better bet."