By Joseph Plocek
WASHINGTON (MNI) – Pervasive weakness illustrated in the 3+ point
drop in the September MNI Chicago Report to 49.7 might reflect temporary
pessimism after an area teachers’ strike, especially with the
Milwaukee PMI rising off a low, or it might be a more important signal
of downturn, and only time will tell which interpretation is better.
There are a handful of other times the MNI Chicago Report’s index
dropped below 50 only to bounce.
Two recent such episodes were in October 1992 and October 1985 —
both in the middle of expansions.
But 3+ years into expansion, about where the U.S. stands currently
— that is in spring 2005, summer-fall 1994 and winter 1986 — there
were no such episodes. This suggests there might have been seasonal
adjustment glitches in the distant past in October data, rather than
that the MNI Chicago Report gives consistently erratic signals.
More generally a drop in the MNI Chicago Report starts a trend.
There are unbroken strings of below-50 readings in August 1990 to June
1991, August 2000 to January 2002, and March 2008 to October 2009 that
clearly signaled recession.
So the bottom line is that we will have to wait for more data to
see whether the September drop is signaling a contraction.
–Joe Plocek, email@example.com, Tel. 202-371-2121
** MNI Washington Bureau: 202-371-2121 **