September Chicago PMI fell
Continuing with a downslide, the Chicago PMI (purchasing managers’ index) fell by 5.7 points to a reading of 48.7 in September 2015. It fell below the consensus estimate of 53.6. Production growth and new orders fell.
XLI fell more with a reading below 50
Over the past year, the Industrial Select Sector SPDR ETF (XLI) fell 4.30% and the SPDR Dow Jones Industrial Average ETF (DIA) fell 3.10% as of September 30. Industrial goods companies like Caterpillar (CAT), Cummins (CMI), and Deere & Company (DE) fell 12.70%, 9.80%, and 7.50%, respectively, over the past month as of September 30. However, industrial conglomerates like 3M (MMM) and General Electric (GE) rose 2.40% and 5.60%, respectively, over the same period.
Of the five components in the index, employment and supplier deliveries managed to remain above a reading of 50. With companies running below capacities, production fell. Also, new orders fell significantly. They’re below their historical averages.
The Chicago PMI is a closely watched leading indicator of US economic activity. It’s released monthly. It’s released one day before the ISM Manufacturing Index. It includes data about manufacturing and non-manufacturing activity. A reading above 50 indicates expansion. A reading below 50 represents a contraction. A reading of 50 indicates no change.
With the reading falling below 50 in September, the Chicago PMI indicates a slowdown in the economy. Falling crude prices and a slowdown in China are impacting businesses. Companies are getting more cautious because of the gloomy environment and volatility around the world.