Chicago PMI Was Flat and the Industrial Sector Fell ~5% in August
Chicago PMI was flat and industrial ETFs fell
The August reading of the Chicago PMI (purchasing managers’ index) came out on Monday, August 31. The Chicago PMI summarizes current business activity. Investors in stocks and bonds track the index for important business activity clues that eventually impact their returns.
The Industrial Select Sector SPDR ETF (XLI) and the SPDR Dow Jones Industrial Average ETF (DIA) track the performance of companies directly contributing to business activity in the US (SPY). They fell due to the report. XLI fell 0.89% while DIA fell 0.69% at the close of trade on August 31. XLI fell 4.98% in August.
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US industrial sector companies like Textron (TXT), Boeing (BA), and United Technologies (UTX) fell on August 31. Textron fell 2.29%, Boeing fell 1.92%, and United Technologies fell 1.75%. Another factor that impacted these aerospace industry companies was the slight rebound in oil prices that we saw during the last three days in August.
Chicago Business Barometer
The ISM-Chicago Business Survey provides a regional view of the conditions in Chicago and the Midwest areas of the US. It’s a time-tested, market-moving report that’s released monthly by the ISM (Institute for Supply Management) of Chicago. The result of the survey is the Chicago Business Barometer. It summarizes current business activity. It’s also known as the “Chicago PMI.”
Chicago PMI: August report was flat due to the global slowdown
In August, the Chicago Business Barometer fell 0.3 points to a 54.4 reading. The reading flattened due to the slowdown in new orders and production components. The backlog orders contracted. Employment also continued its falling trend. The shipments component helped cushion the fall in the composite index. Inventories also recorded a rise.
The flattening of the Chicago PMI curve in August is partially due to the growing concerns about weakening growth in China while Europe still needs to gather pace. However, the barometer did bounce back in the third quarter. This indicates that the US industrial sector is proving its resilience to many factors. This includes the oil price plunge and the appreciating dollar.
Business activity in the US seemed to flatten in August. Another key industrial sector report that validates this point is the Dallas Fed Manufacturing report. We’ll discuss it in the next part of this series.