Credit Suisss on the Chicago PMI

October 31st, 2008 1:01 pm | by John Jansen |

Here is a note that economists at Credit Suisse distributed on the Chicago PMI. In their opinion it is worse than scary.

CHICAGO PMI 37.8 Oct vs 48.0 consensus, 56.7 Sep
  New Orders 32.5 Oct vs 53.9 Sep
  Production 30.9 Oct vs 71.4 Sep
  Employment 41.5 Oct vs 49.1 Sep
  Inventories 56.5 Oct vs 37.7 Sep
  Prices Paid 53.7 Oct vs 80.7 Sep

Scary doesn’t do this report justice.  This abysmal report follows all other pre-ISM regional reports which carried the same tone – an abrupt change occurred in Oct.  The plunge in the headline index left it at the lowest level since the 2001 recession.  Demand side indicators collapsed.  The 21.4 point drop in New Orders was the worst since the series began in 1968; the 40.5 drop in Production was the worst since its inception in 1946!  The excess supply signal has never been worse – the New Orders-Inventories spread was -24.0.  Price pressures eased rapidly – the 27.0 point drop in the Prices paid index was a record since 1946!

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  1. 7 Responses to “Credit Suisss on the Chicago PMI”

  2. By cyclingscholar on Oct 31, 2008 | Reply

    I thanks Across the Curve for pointing out that the financial crisis may be in its healing stages. It has helped me make some profitable transactions in recent days…couldn’t happen to a nicer guy.

    Lets assume for a moment the Financial crisis has passed. The NEXT issue is (1) just how severe the recession will be, (2) how great will be aggregate impact on sp500 earnings, and finally, (3) what multiple might we wish to apply to those earnings.


  3. By JLA on Oct 31, 2008 | Reply

    I don’t think a lot of emerging market countries feel the crisis has passed. And 3MO LIBOR’s move downward did not exceed the expected point differential of the 50bps FFR cut.

  4. By Milton Arbogast on Nov 1, 2008 | Reply


    In order for the economy to function, the population must be employed.

    Your questions miss this fundamental point.

    The real question is: will there be >20% unemployment?

    I know that it is de rigueur to scoff at that question, but wait awhile.

  5. By george on Nov 2, 2008 | Reply

    interest rate observers are popping up everywhere now! plunging bond yields and a strengthening currency…hmmmm, very interesting. response to 9/11 as a peace dividend? republicans have always been good for the bond market. W seems to have “fulfilled his destiny.”

  6. By Owner Earnings on Nov 2, 2008 | Reply

    cyclingscholar, thanks for taking the other side of my short position.

  7. By Jill on Nov 2, 2008 | Reply

    {cyclingscholar “The real question is: will there be >20% unemployment?”}

    We are more than halfway there already…

    Total unemployment is now 11 percent.

    Here’s the link:

    In U6 column, check “Seasonally Adjusted” then “Retrieve Data”

    U-6 “Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers”

    The BLS stopped counting as unemployed workers who have been out of work so long that they have run out of unemployment benefits and are considered to have stopped actively looking for work, despite the fact that those workers are ready and willing to work. Before the Carter Administration, those long-term unemployed were counted in the headline figure — and it became an embarassment to the Carter Administration when unemployment soared due to the Oil Crisis and rolling recessions. Once they removed these “discouraged” workers from the count, succeeding administrations found that this statistical “trick” worked very well and it has been retained ever since then. That’s why todays headline figure is not a statistic which is comparable to the levels of unemployment before the mid-‘Seventies. Back in the ‘Sixties, economists believed that 6% was an absolute floor below which the employment rate could not fall.

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