Chicago area manufacturing gauge falls to lowest since 2015
A gauge of factory activity in the Midwest weakened to its lowest level in nearly four years, signalling the ongoing trade war continues to weigh on the industrial economy.
The Chicago Purchasing Managers Index tumbled to 43.2 in October, data on Thursday showed, down from 47.1 the previous month and missing economists’ expectations.
That was the lowest reading since December 2015 and marked the fourth time in five months the index has contracted. Readings below 50 signal that output in the industry is contracting.
Some of the details of the report were ugly as well, with the new orders index falling to its lowest in more than a decade and order backlogs falling sharply. However, the employment subcomponent improved but remained in contractionary territory.
“We don’t know why Chicago PMI fell this month, though it might be connected to the deepening crisis at Boeing, which is headquartered in the city,” said Ian Shepherdson, economist at Pantheon Macroeconomics. It was not immediately clear what effect the General Motors US factory strike had on the region.
While this report is more volatile than the official manufacturing gauge, it does add to signs of a slowdown in the industrial economy amid the ongoing US-China trade war and signals the weakness in the manufacturing sector is continuing into the fourth quarter of the year.
The report indicated that 26 per cent of respondents indicated a “major negative effect” on their business from government imposed tariffs, while 56.5 per cent noted “a little negative impact”.
While the US economy cooled less than feared in the penultimate quarter of the year, the GDP report showed that weak business investment offset stronger consumer gains.
The Federal Reserve has delivered three interest rate cuts this year to support growth but signalled it has finished easing monetary policy for the time being, pending clearer economic data.