–Order Backlogs Recover from Two-Month Contraction
–New Orders Erase Half of September Gain
–‘Business Strong Now in Our Sector, But 2012 Looks Weak’

By Denny Gulino

WASHINGTON (MNI) – The Chicago Business Barometer backed off to a
slower-growth 58.4 in October after seasonal adjustment, under
expectations and down from September’s 60.4, but accompanied by a
notable strengthening of order backlogs as well as a six-month high for
the Employment index.

After two months of above-expectations performance, the October
Barometer, also known as the Chicago PMI index, “stabilized precisely in
line” with its three-month moving average, in the words of the report,
generated by the Chicago Institute for Supply Management’s survey
committee.

While the overall number “reverted to trend,” all the other numbers
split evenly between ups and downs with just moderate changes,
suggesting a “dynamic equilibrium” as the economy continued to coast on
a “low growth/low inflation plateau.”

Nevertheless, all the indexes came in well above 50, the dividing
line above which the results imply continuing growth. For the headline
number, October was the 25th month of overall expansion.

Without seasonal adjustment, October’s top number was 57.8, down
from September’s 62.8.

The Employment index rose to 62.3 from September’s 60.6, a third
month of improvement and well up from July’s trough for the year of
51.5 as well as above the year’s median of 55.1.

The Production index was hardly changed at 63.4 in October,
slightly off from September’s 63.9.

The New Orders index was 61.3 compared to September’s 65.3.

The Inventory index was 54.4 in October, down appreciably from
September’s 60.3.

“The combination of both lower Inventory and New Orders indexes
would prove more disconcerting absent improvement in Order Backlogs,”
the report’s analysis section said.

Order Backlogs, after adjustment, rebounded to 51.2 from
September’s 45.4, back in the neighborhood of August’s 49.6. July was
55.7.

The Supplier Deliveries index moved up to 55.8 from September’s
51.9.

The Prices Paid index was 66.0 in October, accelerating from
September’s 62.3 but well below numbers in the 70s earlier in the year.

“While the key auto and housing industries strain to find new
footing in an uncertain economic landscape, the challenges of financial
restructuring contribute another dollop of uncertainty,” the report
said.

Among the comments submitted by some respondents was one that said,
“Business strong now in our sector, but 2012 looks weak based on
uncertainty and weakening general economy.”

Another comment, submitted anonymously, said, “Global economic
issues controlling commodity prices more than domestic fundamentals
currently. Hard to predict what drivers are in charge each day.”

Another respondent said, “Volatility in the financial markets
pushing us to lower inventory levels so we don’t get caught with an
excess.”

The Chi PMI headline number is computed from five weighted raw
indexes with the production weighting 0.25, New Orders 0.35, Order
Backlogs 0.15, Employment 0.10 and Supplier Deliveries 0.15.

** Market News International Washington Bureau: 202-371-2121 **

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