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Chicago PMI: Surprise Decline to Start 2017; ISM Preview

January 31, 2017
Bottom Line: The Manufacturing survey barometer for the Chicago region fell sharply, barely holding levels that suggest expansion in January after finishing 2016 with its strongest quarter in over two years. New orders fell sharply in January with that component suggest contraction. And while employment fell for the 3rd straight month, factory gate prices were higher again. Other regional surveys were mostly higher in January, though. This leaves the potential for a slight miss in tomorrow's national ISM report (expected to rise slightly to 55 from 54.5) -- but given the strength of most other regions, it would be surprising to see much of a decline.

The Chicago Purchasing Managers' Index FELL by 3.6 points to 50.3% in January, below market expectations for an increase to 55.0%.

The report highlighted: that a ..." slide in demand contributed the most to the Barometer’s fall. New orders fell by 7.8 points, slipping into contraction territory, to the lowest level since December 2015. Growth in Production also eased, down 2.3 points to 56.0 in January. Order Backlogs rose but remained in contractionary territory. With lower orders and output, demand for labor fell. Employment remained below the break-even level for the third straight month. Supplier Deliveries lengthened, to the highest level since May last year"

ISM Preview - recapping the other regional indices:
On an ISM weighted basis Empire State rose by 2.0%. Richmond climbed by 1.0%, Philly rose by 6.0%, Kansas City increased by 6.1%, and Dallas increased by 4.9%.