US Tumbles Into Manufacturing Recession With Abysmal Chicago PMI Report

Tyler Durden's picture

America has never - ever - avoided a recession when Chicago's Business Barometer has collapsed to these levels. At 42.9, missing the expectations of 50.0 by the most ever, down from 48.7 in November, the final US economic data point of the year sums up perfectly what a disaster Yellen has hiked rates into.

Recession!!!

 

The details are ugly across the board:

  • PRICES PAID IN CONTRACTION FOR FIFTH MONTH
  • EMPLOYMENT CONTRACTS; LOWEST SINCE JULY 2015
  • INVENTORIES HIGHER AMID SLOWER DEMAND
  • PRODUCTION SEE 6TH MONTH OF CONTRACTION IN 2015
  • NEW ORDERS DECLINE SHARPLY TO LOWEST SINCE MAY09
  • PLUNGE IN BACKLOGS TO LOWEST SINCE MAY 2009
  • DEC BUSINESS BAROMETER LOWEST SINCE JULY 2009

The full details from Market News:

The December Chicago Business Barometer contracted at a faster pace in December, down 5.8 points to 42.9, a fresh 6-1/2 year low and the seventh contraction this year. 

 

December's decline placed the barometer's fourth quarter average at 49.3, matching that of Q2 2015, the weakest quarter since Q3 2009.

 

The biggest contributor to the barometer's decline was a 17.2 point fall in Order Backlogs, to 29.4, marking their eleventh consecutive month in contraction. December's print was the lowest since May 2009.

 

In addition, the Barometer was depressed by ongoing weakness in New Orders, which contracted at a faster pace, down 5.3 points to 38.8, the lowest level since May 2009. In line, Production and Employment fell back into contraction.

 

The only component of the barometer to expand at a faster pace was Supplier Deliveries, although some companies noted that the rise was influenced more by logistics issues during the holiday season and in preparation for Chinese New Year on February 8.

 

The barometer continued to feel the ill effects of general sluggish demand and lower energy prices, which have left their mark on Chicago area companies, along with the stronger US dollar. Moreover, well above normal temperatures, has impacted many businesses that rely on cold weather.

 

Inventories, which is not a component of the Barometer, expanded to just above neutral as companies found themselves left with stocks of finished goods amid the weaker demand backdrop.

 

Prices Paid was up but remained in contraction for the fifth consecutive month. Purchasers felt confident that cost increases were confined to non-raw material prices. 

 

Purchasers overwhelmingly reported that business activity levels were below seasonal norms. This feedback came from companies who usually see an uptick in business into the holiday selling season as well as those who see business taper off into the holiday.

 

Firms gave a downbeat assessment of full-year activity levels in the Chicago area, reflected both in comments from panellists and the barometer itself. The average of the Chicago Business Barometer fell to 50.4 in 2015 having averaged 60.7 in 2014, with conditions towards the end of Q4 proving particularly difficult.

 

The barometer fell deeply into contraction in February as oil prices started to fall. This led to a year earmarked by unrealised forecasts for both revenues and orders, which ultimately materialised in two inventory corrections, one after a wetter than normal start to summer and into year-end.

 

Additionally, area business was held back as companies responded to ongoing market turmoil in Greece from January through August while a weakening in China ploughed through the markets in the summer months. Extreme volatility in the equity markets in August also left its mark on area business at the end of the summer. By September, purchasers were hoping for a surge of orders late in Q3, and despite inventory preparations, demand failed to materialise.

 

Despite the ongoing contraction in business conditions in December and a sluggish year, expectations from purchasers were for a better 2016. According to a special survey question, 55% of  purchasers expected demand for their products and services to be higher in 2016. Some 30.6% expected demand to be flat and 14.3% though orders would be lower.

To be sure, there is always something to blame:

  • SOME COMPANIES NOTE WARM WEATHER HURTING DEMAND

Purchasers overwhelmingly reported that business activity levels were below seasonal norms. This feedback came from companies who usually see an uptick in business into the holiday selling season as well as those who see business taper off into the holiday.

Firms gave a downbeat assessment of full-year activity levels as companies found themselves left with stocks of  finished goods amid the weaker demand backdrop

But apart from that - The Fed would not have hiked rates if the economy was not doing great right?

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kotfare17's picture

Exactly what I predicted 2 years ago and that is why the Fed will aggressively hike rates and abolish interest on excess reserves.

 

The economy badly needs 4% interest rates at minimum as soon as possible, possibly within 2016

stumbLebum's picture

You also predicted higher gold prices, genius.

Ghost of PartysOver's picture

Does Chi PMI include  guns and bullets in the Land Rahm?

SWRichmond's picture

Probably, so it's time to make more bombs and planes.  Wasn't the Pentagon complaining about not having enough bombs?  Don't we make those?

aliki's picture

i mean, its to the point where when u come across someone who points to how packed restaurants are or how the stock market is near an all-time high as factors as to how awesome things are ... not even worth attempting to enter a discussion about how fucked things are under the surface.

i keep going back to how peter schiff was tarred & feathered in 2005 & 2006 about how he was screaming from the highest mountain tops about how fucked the housing market was because of data that was starring EVERYONE right in the face ... i feel like its deja fucking vu right now with people living in fantasy land.

Ballin D's picture

It's been staring us in the face since 2008 and getting worse each year. Everyone who's been screaming about fundamentals has not only looked like they're consistently wrong, they've lost a shit load of money.

 

It all comes down to when the music stops playing. Data doesn't matter when no one cares about it.

aliki's picture

totally agree. and i think we agree the real problem is this can (and most likely will) go on for ALOT longer than most people think. even-if we have another crash, whats the solution gonna be? what most of us who read/post here think/want? (a complete restructuring/defaulting of the debt, balanced budget ammendment, an end to currency manipulation, dealing of the necessary pain we've inflicted on ourselves, etc.)

unfortunately, it most likely will be a doubling & tripling down of this morphine policy we have conducted the last 7 years where we just make it feel better but the debt-disease grows.  outside of trump or cruz, i don't think theres another person on either stage who understands the magnitude of this issue & what NEEDS to be done to ensure our kids & grandkids have a future or just gonna be prisoners to this jail we're gonna whind up trapping them in.

WasNotWuz66's picture

Ed-zachary...........  numbers / schmumbers until the smart money actually gives a shiite about 'em

GotNuttin'todo's picture

And even if you do try to care about the data, you can't rely on it because it is all BS.

Omen IV's picture

"packed restaurants" is a secular trend - restaurants have become socialization objective  not eating experience coupled with generational practices concerning not cooking at home - kitchen is considered a designer showscape only

 

 

GotNuttin'todo's picture

Peter Schiff is one of those gloom-and-doom guys who eventually will be right. But you would have lost your shirt if you had been short the housing market from 2005 until 2008. We all know the shit is soon to hit the fan. The trillion dollar question is WHEN?

Mark Mywords's picture

Mother Nature is nothing but an economic terrorist.

But wait. Isn't God in charge of the weather? Shouldn't we be blaming that invisible creature for our bad economy? Somehow I always knew that non-existent troll was worthless.

Exceptional.

trueFacts's picture

... what is with the "117" drops this week, ... on same day dax, dow, and hngseng (or nikkei i forget) all closed down 117, and today again DAX down 117....

GotNuttin'todo's picture

Ooops! I guess they all got the same memo.

_ConanTheLibertarian_'s picture

Now THAT actually is a plunge.

CHoward's picture

Anyone else feel like we're all circling the drain and being slowly sucked into a huge black void?

dimwitted economist's picture

CHoward Yeah, I do..

i Live in Michigan and in a place that has NEVER Been doing GREAT

No matter what year you were talking about.

NOW Howvever you can SEE the WRITING ON THE WALL:

it says loud and clear for all to see:

We Are NOW Entering the Twilight Zone!

ISEEIT's picture

Just an observation:

I'm getting killed. How? With a severely adverse NZD/USD short 'position'. Bent over and it hurts. Commodity carnage seems to be exceptionally beneficial toward those fictional representations of value, referred to as 'money' which are most closely linked to/affiliated with 'commodity currencies'. The AUD and the NZD are killing it.

WHY?

I don't know, however I suspect this is a very telling move by 'big' money into a flight toward safety.

The sort of 'safety' that would only be sought by the very most astute (knowledgeable) among us.

ZH has been aggregating 'doom porn' for quite some time.

Some 'time' genuinely appears to have arrived.

If you aren't fucking seriously concerned...(deer in headlights time?) then some "folk's" envy you.

The rest of us see it coming and wish we didn't.

Janet Shalom Bernanke's picture

Nothing to worry about, we are working with the BLS to jigger the way this is calculated.  Once we are done, you will see the green chutes!

Just as we exclude housing, energy, and food prices from our CPI numbers, if we exclude manufacturing activity from our manufacturing survey, the numbers will be better.

Keep the faith in FIAT, because it is all you have left.

 

starman's picture

We actually manufacture still? 

Janet Shalom Bernanke's picture

we only manufacture e-con reports, we stopped manufacturing "things" back in 2000

Solio's picture

We're #1 in numbers & stuff projected onto a wall of mist!

Sudden Debt's picture

Funny part is that a shitload of stocks, not shares but stocks in warehouses are now being sold off at 90 to 95% discounts.

Companies are taking a beating you can't believe!

Next season for profits is the summer but they are lacking the funds to invest because of this missed season.

So production will be way down through Q1 and 2!

6months of crisis!!

GotNuttin'todo's picture

I wouldn't read too much this PMI report. First of all, WTF knows what the REAL PMI number is. Secondly we have never-ever-never had a ZIRP-NIRP policy (well maybe 2000 years ago when we traded goats for negative-sheep). So it's all BS!

csmith's picture

Is Rahm back from Cuba yet? Everything will be better when he returns.

tokerhead's picture

This isn't the data  your looking for...This isn't the data your looking for...

lester1's picture

It's OK everyone.. Janet Yellen said she does not see a recession in her forecast.

huggy_in_london's picture

"warm weather hurting demand"

hahahahahahahahahahahahahaahhahaaha

stumbLebum's picture

You can't believe the government's numbers, remember?

If the "real" numbers were published, it'd be in the range of 60-70.