Chicago ISM Crashes: How Much is GM to Blame?


The Chicago PMI took a steep dive in two months to 43.2. New orders declined to 37 and backlogs to 33.1.

ISM Chicago reports Chicago Business Barometer Lowest Since December 2015.

  • The Chicago Business Barometer fell 3.9 points to 43.2 in October, the lowest level since December 2015. The index slipped further into contraction with a second straight sub-50 reading. The survey points to further weakness in business activity, with the three-month average falling further to 46.9.
  • New Orders declined to 37.0, its lowest since March 2009 -- Production bounced up to 46.8, although the indicator has been in contraction since July.
  • Order Backlogs saw the largest monthly decline, dropping by 13.6 points to 33.1. The index registered below the 50-mark for a second successive month after September’s level of 46.8.
  • Inventories rose to 47.1, marking the strongest reading since August, indicating that companies continued to run down their stock, albeit at a slower pace. Employment registered a touch below the 50-mark in October, rising by 4.2 points to 49.8.

Special Questions

  1. October’s special question asked “What impact the latest interest rate cuts by the Federal Reserve have on firm’s business?” The majority (51.1%) expect no impact, while 31.1% state a positive effect.
  2. A second asked “How the government-imposed tariffs will affect their firm’s business?” While 56.5% noted a little negative impact, 26% indicated a major negative effect.

Dark Comedy

Mid-Cycle Correction Idea Challenged

Econoday Blames GM

  • It's often hot or cold for Chicago's PMI sample and October, likely due to the GM strike, was a very cold month, at 43.2 for the headline composite index and a 4-year low. And the leading indicator among the report's details, that is the new order index, is at a 10-year low and a very depressed score of 37.0. Backlogs, which are at a 4-year low and at an even more depressed 33.1, are fairing no better. But outside of orders, weakness is less severe with production at 46.8, inventories at 47.1, and input costs still on the rise at 54.8.
  • Order scores in the 30s are usually seen at times of economic crisis which this sample may be suffering from the GM strike which, however, has been tentatively settled in what might prove to be a major positive for November's report.

Questioning the GM Thesis

Judging from the special questions, Tariffs, not GM, may be the major issue.

Mike "Mish" Shedlock

Comments (6)
No. 1-5

How much is caused by the overall business climate in Chicago, and in the State of Illinois? Why would anyone want to expand there?


"Nothing to see here folks. Move along now."

Ian Alexander
Ian Alexander

The release says, survey data is collected from firms in the Chicago area. Any idea how broad of an area it is?

Country Bob
Country Bob

Uncertainty and lack of leadership (I am referring to SP500 CEO's) is the problem.

A certain amount of shareholder buy backs and cost cutting are good things -- too many shares and too many hires during "boom times" that need pruning.

But that was done 2009-2011 (just picking round numbers)... after that, companies need to come up with new products and new services. That has not happened.

Too much central economic planning by corrupt government officials, and not enough back bone by big corporate CEOs.

The media obsesses over trade policiy because they have Trump Derangement Syndrome... but real commerce (not debt induced commerce) has been slow for two decades.

The system is full of debt (over flowing with debt actually) -- so lower fed funds is not going to do anything positive. Over reliance on debt combined with a lack of innovation is the problem.


Mish, Thanks for bringing up the GM issue as part of the reason for lower economic numbers. While the strike did hurt economic numbers we must all remember the company most likely wanted a strike as a way to reduce their huge inventory build. The auto industry again suffers from overcapacity and consumer debt.

Global Economics