Chicago Business Barometer Drops To Six-Year Low In December

(RTTNews) - Chicago-area business unexpectedly saw a continued contraction in the month of December, according to a report released by MNI Indicators on Thursday.

MNI Indicators said its Chicago business barometer dropped to 42.9 in December from 48.7 in November, with a reading below 50 indicating a contraction in activity.

The decrease by the business barometer came as a surprise to economists, who had expected the index to climb to 50.0.

With the unexpected decrease, the business barometer indicated the fastest pace of contraction since July of 2009.

MNI Indicators said the order backlogs index provided a particular drag in December, tumbling by 17.2 points to 29.4.

The new orders index also indicated a faster contraction, falling to its lowest level since May of 2009. The production showed a more modest decrease but still pulled back into contraction territory.

After recovering in recent months, the employment index also pulled back below 50 in December, dropping to its lowest level since July.

Chief Economist of MNI Indicators Philip Uglow said, "The steepness of the decline in the Barometer in recent months ends a particularly volatile year, which has seen orders and output move in and out of contraction."

He added, "It lends weight to the Fed's gradual approach to tightening, with the flexibility to change direction if needed."

On the inflation front, MNI Indicators said the prices paid index increased sharply in December, although it continued to indicate a contraction.