Today's Report (11/30/2021)

The Chicago Business Barometer, produced with MNI, fell to 61.8 in November, the lowest reading since February, driven by a slow-down in new orders.

Among the five main indicators, Inventories saw the largest increase, followed by Production. All other indicators dropped compared to October, with Order  Backlogs seeing the largest decline. Inventories rose to 59.6, the highest since Fall 2018. Some firms reported stockpiling to get ahead of further supply chain disruptions and counteract logistical issues.

Order Backlogs dropped to 60.8, 6 points below the 12-month average, as firms reported a reduction in the size of incoming orders.  Supplier Deliveries declined slightly, however multiple survey respondents reported November deliveries to be the slowest ever.

Prices Paid declined to 93.8, but still only just shy of October’s multi-decade high with ongoing higher costs for production materials reported.

Employment slipped to 51.6, reversing the October gain, and now hovers around the 12-month average as firms struggled to find qualified workers to meet vacancies.

Production recovered slightly in November, following three straight falls from August to October. New Orders fell back to their February level of 58.2.

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.