Stagflation Signals Flashing: Chicago PMI Drops, New Orders Slide As Prices Spike

Tyler Durden's picture

Following November's exuberant spike to Jan 2015 highs, December saw Chicago Purchasing Managers lose some Trumpian hope as the index slid from 57.6 to 54.6 with new orders, production, and inventories all fell. It seems the 'hard' industrial production and durable goods data was right after all and the sentiment-fueled 'soft' surveys once again over-reached.


Stagflation once again looms, as MNI reports, the December decline was led by a slowdown in New Orders, which fell 6.7 points to 56.5, giving up most of the November gain that had left it running at the fastest pace since June. Production also subtracted from the Barometer, ending 2016 at the lowest level since October, while Order Backlogs moved back into contraction. Employment held firm, remaining below 50 for the second month in a row, while Supplier Deliveries was the only component to gain ground in December.

The Inventories Indicator moved back into contraction, sitting below the break-even mark for the eighth time this year, with some firms reluctant to add to their stock levels as we approach the end of the year.

Meanwhile, inflationary pressures at the factory-gate edged higher having eased slightly last month. Prices Paid rose 1.2 points to 58.0 in December, the indicator's second highest outturn of 2016. Panellists in our survey reported that the prices of metals, plastics, and transportation costs were all increasing with another commenting that "prices are headed higher".

This month's special question asked panellists how they expected the new administration's policies to impact their business in 2017.

Over half of total respondents expected their business to prosper, with many citing anticipated tax reforms and deregulation as positive for business. However, 40% thought it would have no impact and 9% said they anticipated a negative impact on their activities.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
wisehiney's picture

Highly deflationary.

Paul Kersey's picture

Skyrocketing house prices, rents, health care costs, insurance premiums, new car prices and college tuitions are far closer to hyper inflation than to deflation. Only wages have been stagnant or deflating over the long term. Throw in a lack of industrial production and you've got some pretty classic stagflation.

spanish inquisition's picture

You think that new ammo orders would carry it higher?

spastic_colon's picture

TPTB are spending a great deal of energy making sure the indexes are green for the first days of 2017.............

jamesmmu's picture

it does sound like next Chicago PMI will be worse

JTimchenko's picture

Stagflation of the 1970s returns for sure. This time even bigger financial changes on the way. Check out this article...

JPM's gold buy hints at changes in world financial system

the grateful unemployed's picture

the central banks are going to adopt some sort of gold standard, the IMF rollout of SDR is based on sovereign reserves, the SDR may be the next emergency measure, but consider a central banker is a vendor with a product and their customers want something more than fiat on a whim, they will give the customer what they want.

DeeZ_nutZ's picture

whatev, motherfuckers, the trump will just tweet the shit out of it and voila - problem solved!  enjoy the parteh!

TuPhat's picture

Guns and ammo I expect will still be sold in increasing quantities.  Under Trump, unlike Obama, the sales will probably not be due to statements from the oval office.  I expect deteriorating social conditions to drive sales, ie brawls in malls etc.  I hear a lot more car horns honking in my small town due to impatient or rude drivers.  It didn't use to be like that and it's only a small thing but all the small things are adding up.

Snaffew's picture

more guns and ammo were sold under the obama administration than any other president in history---by far.  Regardless of the perceived reasons, Obama was the best thing to happen for the second ammendment.

allamerican's picture

dig these up opens then flush.  reminds me of 98-99.  old huh..

stagflation.  like 64-65??  who was that johnson..

DeeZ_nutZ's picture

whatev, motherfuckers, the trump will just tweet the shit out of it and voila - problem solved!  enjoy the parteh!

dumbhandle's picture

I am not buying this at all.  During the holiday week, we had more orders than available supply for the first time in 27 months.  The orders were for immediate delivery.  We saw indications a few weeks ago with a stable price and panicky buyers.  We are raising prices for Feb.  The drought appears to be over.  Our customers are out of product.  Now a sellers' market.  The carnage was wudespread during the 27 months.  3/4 competitors gone.

the grateful unemployed's picture

customers out of product. sellers market, what arent you buying?

Snaffew's picture

exuberant holiday shoppers can explain your statement.   That is not a change nor the norm.

the grateful unemployed's picture

the trend in this chart started with the first rate hike, and it has yet to reach the 2014 levels, so far this is just spitting in the wind, the trend is deflation, or maybe stag deflation, rising rates and falling prices, which if you understand the metrics of home pricing is the essence of the problem, all things being equal when you raise the cost of borrowing, the value of the asset to the seller drops. and without wage pressure all things are equal or maybe less than equal, as wages fall as well. hear about the new robot union?

Snaffew's picture

Trump "hope" is all that it is.  Americans are more tapped out than ever and things are going to get much worse before they get better.  If they don't, then we are not addressing the problems in America.

olebugger's picture

You need high nominal GDP growth for stagflation and we don't have that.

moonmac's picture

Chinese Steel Mills raised surcharges by 34% in January even with both our factories closing down 3 weeks for New Year because they are extremely slow? It’s not the fall that kills you it’s the massive divergence between the sky and the ground.

truthalwayswinsout's picture

So does this mean more or less black on black killings?