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Chicago Business Barometer Indicates Continued Expansion In December

Chicago Business Barometer Indicates Continued Expansion In December

Chicago-area business activity expanded for the second consecutive month in December, according to a report released by the Institute for Supply Management - Chicago on Friday, with the Chicago business barometer rising by more than expected.

The ISM Chicago said its Chicago business barometer climbed to 51.6 in December from 50.4 in November, with a reading above 50 indicating an increase in business activity. Economists had expected the index to rise to 51.0.

A notable turnaround by new orders contributed to the increase by the business barometer, with the new orders index jumping to 54.0 in December from 45.3 in November.

However, the ISM Chicago noted that five of the six other business activity indexes declined in December, with the employment index showing a sharp drop.

The employment index tumbled to 45.9 in December from 55.2 in November, with the reading below 50 indicating a drop in Chicago-area employment. The drop pulled the index to a three-year low.

The production index also fell to 53.8 in December from 54.7 in November, although the reading above 50 continued to point to expansion.

With regard to inflation, the prices paid index slid to 61.7 in December from 70.1 in November, indicating a slowdown in the pace of price growth.

James Knightley, senior economist at ING Financial Markets, said, "This very mixed performance has been replicated across the regional PMIs with around half rising and half falling."

Next Wednesday, the Institute for Supply Management is scheduled to release its report on national manufacturing activity in the month of December.

The ISM's manufacturing index fell to 49.5 in November from 51.7 in October, with a reading below 50 indicating a contraction in manufacturing activity. With the decrease, the index fell to its lowest level since coming in at 49.2 in July of 2009.

"It is quite clear that households are becoming very worried about the impact from the 'fiscal cliff' as indicated by the plunge in the Conference Board measure of consumer confidence yesterday," Knightley said.

He added, "We see the risk that the orders and employment component for the national ISM are also weak as the uncertain outlook for demand makes firms more cautious about hiring new workers and building up inventories."

by RTT Staff Writer

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