Midwest Regional Factory Indices Decline

Date: October 05, 2015

Area’s Factory Activity Contracted In September

Two separate indices for Midwestern factory activity declined in September, indicating the region’s factory activity slowed. Reuters reported that the Chicago Purchasing Management Index declined in September to 48.7 from August’s 54.4. Economists surveyed by Reuters had expected a reading of 53.0. Any reading above 50 is an indication of expansion, but September’s reading indicates the region’s factory sector is contracting even as vehicle demand was strong. According to a release about the Chicago PMI, this marked the fifth month in 2015 when the index fell below 50. Of the five categories making up the full index, three were negative, while employer and supplier deliveries remained above 50, indicating some growth. Commenting on the release, MNI Indicators chief economist Philip Uglow said, “While activity between Q2 and Q3 actually picked up, the scale of the downturn in September following the recent global financial fallout is concerning. Disinflationary pressures intensified and output was down very sharply. We await the October data to better judge whether this was a knee jerk reaction and there is a bounceback, or whether it represents a more fundamental slowdown.”

Meanwhile, Reuters reported that the factory activity index from Marquette University and the Institute for Supply Management-Milwaukee also dropped to its lowest level in 2015, a reading of 39.44 in September after hitting 47.67 in August. Most of the index components for the Milwaukee region, such as new orders and production, had large drops in September. Marquette University and the Institute for Supply Management-Milwaukee explained, “There has been slowing demand from customers as the end of fiscal year is approaching.”

What This Means For Small Businesses

Regional manufacturing data suggests a slowdown in manufacturing, which may affect small businesses across sectors. One month’s data is likely not enough to point to trends suggesting small businesses should worry about a broader contraction of demand for manufactured goods. However, these indices show the US economy has room for improvement as it struggles to boost post-recession growth.

Additional Reading

NFIB previously noted monthly manufacturing activity results.

Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.

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