Today's Report (12/30/2021)

The Chicago Business Barometer, produced with MNI, rose to 63.1 in December, picking up again after last month’s decline. Inventories hit a four-year high as firms created buffers for longer lead times.

Among the main five indicators, Production and New Orders and were higher. Order Backlogs, Employment, and Supplier Deliveries fell across the month.

In December, Production continued to increase, rising modestly by 0.4 points to the highest reading since July 2021.

Employment dipped again for the second month in a row, dropping 7.0 points to the lowest since June 2021. Firms stated that finding new hires to fill empty positions is challenging.

After the sharp November fall, New Orders recovered almost to October’s level, picking up 8.2 points to stand at 66.5.

What is it?

Measures business activity in the mid-west region, manufacturing, and non-manufacturing firms are surveyed. 200 managers are asked in Illinois, Indiana, and Michigan. It moves about 60% of the time in the same direction. The survey concentrates on a region considered to be the industrial heartland of the nation.

The index is made up of 35% new order, 25% production, 15% order backlogs, 10% employment, and 15% supplier deliveries

What are the fundamental effects?

Readings above 50 indicate an expanding business sector. A reading below 50 suggests some contraction in business activity within the region. The Fed monitors this report to study conditions in the manufacturing sector. For traders, it’s more about where the US ISM PMI and Chicago PMI are headed rather than the level of change.

How does it affect the markets?

CURRENCY - The reaction is generally muted.

STOCKS - A higher than expected reading in both the Chicago PMI could mean that the stock market might be more confident and that corporate profits are on the rise.

BONDS - An unexpected surge in the PMI can potentially cause bond prices to fall.