ISM Chicago reveals the U.S PMI for January at its worst since December 2015

ISM – Chicago announced the U.S Purchasing Manager’s Index (PMI) for January on Friday. Having dropped to 42.9 this month, the reading was branded the worst since December 2015. The index had previously posted gains in the past two months. With massive contraction in January, however, three- month average for Chicago PMI now stands at 45.9 that weighed on the U.S dollar strength in the forex market on Friday.

As per the report, all five of the primary components of the index recorded a decline in the monthly report with the greatest drop seen in Order Backlogs with New Orders following in its footsteps. January’s report hinted at a major drop in demand that saw a 6.1 points drop in new orders that were recorded at 41.5 this month.

Order
Backlogs Lost 10.1 Points In January To Record At 34.6

At
42.7, production was reported to have lost 3.8 points. The current reading was
also highlighted as the worst since July 2019. With the sharpest drop in the
monthly report in terms of points as well as percentage decline, orders
backlogs were noted at 34.6 in January that marked a massive 10.1 points decline.
The reading came out as the lowest in the past four years.

ISM – Chicago also announced on Friday that the indicator only printed expansion (above 50.0 reading) once since March 2019. In January’s report, inventories dropped by 5.8 points and were recorded at 40.2 which was the lowest level for inventories since May 2016. Inventories were also highlighted to have posted a below 50 reading for the sixth month in a row.

At
47.0, employment in January was accentuated as broadly unchanged with an
insignificant decline of 0.2 points this month. The only component of the
headline index that registered above 50 was supplier deliveries at 53.3 in
January. The reading was still lower than that of December’s.

60%
Of The Respondents Expected No USMCA Agreement Driven Improvement

Factory
gate prices were reported at 56.1 in January’s Chicago PMI. With 2.1 points
decline, it was the lowest reading for factory gate prices in the past two months.
January’s survey questioned if the USMCA agreement is likely to improve
supplier lines. 60% of the respondents (majority) expected no improvement while
the remaining 40% were only confident of a slight improvement in the upcoming
months.

The
second question of prime importance that requested insight into the forecast
for business activity in 2020 met with 50% (majority) of the respondents
anticipating a below 5% of average growth. 43.2% of the respondents were
confident that
the average growth will print between 5 to 10 percent with a mere 6.8%
estimating growth to surpass the 10% mark.