Sharpest decline in midwest business activity since July 2009

2015 ends on a low note in the midwest.

The Chicago purchasing manager index (PMI) unexpectedly plunged to 42.9 in December, which is the lowest reading since July 2009.

Any reading below 50 signals a contraction in business activity.

This was down from 48.7 in November and much worse than the 50.0 expected by economists.

"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," MNI Indicators' Chief Economist Philip Uglow said. "It lends weight to the Fed's gradual approach to tightening, with the flexibility to change direction if needed."

The new orders and employment components both showed significant deterioration.

But hope remains.

"The only positive this month came from a special question with 55.1% of the panel expecting demand to be stronger in 2016 compared with 14.3% who thought it would be lower," MNI noted. "30.6% of respondents thought demand would be unchanged."

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