Chicago PMI Mixed Bag While Pending Home Sales Disappoint

Alan Penny

30 December 2019

3 min read

  • Better than anticipated for December
  • Still shows contractionary momentum
  • Pending Home Sales lower than anticipated

Early North American trading on Monday, the US released a handful of figures suggesting where the United States economy is going. Among the released figures were the Chicago PMI (Purchasing Managers Index) figures for the month, as well as Pending Home Sales month over month. Ultimately, these show a reasonable snapshot of what’s going on in the United States.

Economy still shrinking

The Chicago PMI figures came out early during North American trading, printing a figure of 48.9 as opposed to the 48.2 expected. While this did beat estimates, it is still below the contractionary line at 50. It shows that the economy is still shrinking as far as purchasing is concerned by managers in large businesses. That being said, it is a mixed bag as it is better than anticipated but hardly bullish. Perhaps the best phrase to use for this announcement is “less bad than expected.”

It shows that the economy is still shrinking as far as purchasing is concerned by managers in large businesses 

Furthermore, the Pending Home Sales came out month over month at 1.2%, as opposed to the expected 1.5%. That obviously is less than anticipated but there was also a revised figure from the previous month from -1.7% upwards to the -1.3%. Ultimately, this is a market that has been a bit soft as of late. This should not be a huge surprise as it is relatively late in the cycle when it comes to real estate in the United States. Plus confidence might be a little bit shaken at this point. The market would be looking for the interest rate markets to provide a little bit of help, but it’s very unlikely that it is simply an interest-rate problem. It could perhaps be a spending problem.

Things in the US are softening

The main take away from these announcements is that things in the United States seem to be softening up a bit. While the initial response might be to short everything US-related, the reality is that there are a lot of moving pieces currently. For example, the US dollar has gotten a bit softer as of late but looking at this through the prism of what the Federal Reserve may or may not do is probably the correct reaction.

At this time, the market is likely going to be looking at whether or not the Federal Reserve is going to loosen its monetary policy. Because of this, it will be interesting to see how bond yields react and of course the US dollar.

One thing is for sure, the United States is softening a bit and there may be a central bank reaction and that could have major ramifications going forward. Currently, most traders don’t look to the Federal Reserve to cut interest rates but as of late there have been several soft indicators that could push them in that direction given enough time. Ultimately, this is yet another thing to pay attention to coming out of the United States.

Written By
Alan Penny

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