According to tradingeconomics.com, the latest reading of the Chicago Purchasing Manager’s Index, or PMI, declined to 58.4 in October from a September reading of 60.4. Although a reading over 50 represents growth, the October data was the lowest reading since April.
- Third consecutive monthly decline
- Lowest reading in past six months
- Recent declines could point to decelerating growth
Although the latest figure on PMI is still a fairly good number, it does seemingly show that economic expansion may be slowing. Further signs of slowing growth, combined with an ongoing trade war with China and rising interest rates, could fuel risk aversion and potentially even give the Federal Reserve reason to rethink its policy plans for next year. The central bank currently anticipates another rate hike this year and has three penciled in for 2019.
What Exactly Is Chicago PMI?
Chicago PMI measures both the manufacturing and non-manufacturing sectors of business activity in the Chicago area. The index is computed by using five weighted raw indexes including: Production (0.25), New Orders (0.35), Order Backlog (0.15), Employment (0.10), and Supplier Deliveries (0.15). The data is then seasonally adjusted to provide month-to-month comparisons. Readings above the 50 level indicate expansion while readings below the 50 level indicate contraction.
Gold Market Reaction
Gold is moving moderately lower today as stocks move sharply higher. Despite the Dow Jones Industrial Average moving higher by nearly 300 points as of this post, October has been a brutal month for equities and many investors will be happy the month is over. Risk appetite is on the rise today, and thus demand for the perceived safety of gold is on the decline. The yellow metal is trading lower by $7.60 at $1215 per ounce.