The ISM-Chicago survey which measures business activity and presents a regional view of the economy fell sharply on Tuesday, dropping to 52.6 from 58.7 in March. The result is contrary to relatively flat expectations of a 0.03 gain.
Key Takeaways
- The Chicago PMI dropped in April from 58.7 to 52.6 vs. 59 expected, the lowest reading since January 2017.
- Four of five components declined, with new orders falling for two months in a row.
- A reading of above 50 indicates improving conditions, but the sudden and unexpected drop does not bode well for the sector.
Softening domestic demand, as well as a general economic slowdown seen worldwide, have negatively impacted business activity. Supplier delivery times shortened to the lowest level since April 2017 after years of relatively flat activity.
The employment indicator dropped to the lowest level since October 2017 as labor demand declined in response to a pullback in demand for production. The employment indicator is now below both the three-month and twelve-month averages.
Orders backlogs picked up, rising back into positive territory after sinking below 50 in March, and production dropped significantly, hitting the lowest point since May 2016. New orders are below the three-month and twelve-month averages.
Oops
MNI Chicago PMI 52.6 (-6.1) lowest since Dec 2017 expected 58.5 pic.twitter.com/0YRlizG2xK— Real Vision Research (@RVAnalysis) April 30, 2019
Expert Outlook
"This was a disappointing start to the second quarter, with more firms cutting back on both production and employment against a backdrop of softer domestic demand and the global slowdown," said Shaily Mittal, senior economist at MNI.
“Most Barometer components have dived below their respective 12-month averages, pointing towards greater business uncertainty among firms,” she added.
Market Reaction
Gold ticked upward since the news with spot gold last trading at $1,281.83/oz, up 0.25% on the day with a high of $1,286.18/oz and a low of $1,278.96/oz. Today’s range is straddling a key psychological line of support and resistance at $1,280/oz, and analysts will be watching carefully to see if the joint release of sub-expectation housing and business reports will be enough to buoy spot gold upward in the face of selling pressure created by the report that consumer confidence rose in April.
Gold Price Chart
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