–Four of Seven Business Activity Indexes Improve
–Trend Data Up For 5 Biz Activity Indexes Including Employment
–New Orders at Eight-Month High
–Production/Order Backlogs Multi Month Highs

By Alyce Andres-Frantz

CHICAGO (MNI) – The November Chicago Business Barometer
rose 4.2 points to 62.6, its highest level in seven months, led by
increases in New Orders, Order Backlogs and Production — and other key
details showed the report was even stronger than initial appearances
would indicate.

The Business Barometer’s short-term trend, otherwise known as the
three-month moving average, broke a seven-month downtrend as it
increased 2.0 points to 60.4, the report showed Wednesday.

Jack Bishop, founder of Kingsbury International and the original
developer of the Chicago Business Barometer said, “The current recovery
is especially challenging. The pervasive impact of financial excesses
clouds frames of reference and confounds simple solutions.”

However, “November’s Chicago Report marked a turning point for the
U.S. economy, reversing a seven-month short-term trend of consistently
slowing in the rate of recovery,” Bishop said, noting both the November
Chicago Business Barometer and its three-month moving average “reversed
direction and climbed.”

Moreover, improvement was seen in four of seven Business Activity
indexes. Good news was also gleaned from increases in the individual
indexes’ three-month moving averages for New Orders, Production, Order
Backlogs, Inventories, and Employment. Finally, two of the three
contracting monthly indexes saw increases in their short-term trends.

November’s report was highlighted by a substantial 9.0 point rise
in New Orders to 70.2, an eight-month high. Production rose 3.9 points
to 67.3, its highest level since April 2011. November Order Backlogs
increased 3.9 points to 55.1, its best level since July 2011.

“Improvement in November Order Backlogs was consistent with New
Orders expanding faster than Production during the month,” Bishop said.
Additionally, gains in Order Backlogs came atop a solid 5.8 point gain
in October and in the context of September’s 25-month low.

Meanwhile, Supplier Deliveries eked out a second month of gains for
the first time since May 2010.

At first glance, a 5.4 point decline in the Employment index to
56.9 “raised concerns,” Bishop said. However, in spite of the
month-over-month decline, the three-month moving average for Employment
remained on an upward trajectory since August.

“Thus, the November report was stronger than would appear from a
quick scan of the highlights,” Bishop said.

The November Prices Paid index fell 5.8 points to 60.2, a 14-month
low, and continued its ninth month of deceleration in its short term
trend.

“To the extent that the slowing in the breadth of inflation can be
attributed to working off an earlier bubble in commodity prices, even
this Prices Paid reading can be considered good news,” Bishop said.

“Furthermore, the small 0.8 point decline to 53.6 in Inventories
provides evidence of careful inventory control as operations continued
to nibble away at September’s broad increase,” Bishop said.

Buying Policy measures were little changed. The sensitive MRO
Supplies index saw a minor lengthening. The Production Materiel index
retreated from September’s 13-month high, while the Capital Equipment
index saw a minor shortening.

Comments submitted by survey respondents echoed Bishop’s
sentiments. One comment said new orders in November should keep business
booked “well into the second quarter,” while another observed “it feels
as if the market is making a comeback.”

Furthermore, survey participants cited strong demand for aluminum
products while others cited difficulty with lengthening lead times.

Also in line with Bishop’s comments, survey participants expressed
relief because of recent decreases in commodity prices and flat to
lower prices from suppliers.

–email: aandres@marketnews.com

** Market News International Chicago Bureau: (708) 784-1849 **

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