Chicago Purchasing Managers' Index (DEC) (15:00 GMT, 10:00 EST)
Consensus: 60.0
Previous: 61.7

Outlook: The Chicago Business Barometer is expected to move down to 60.0 from 61.7 in December, which would be the index's second consecutive fall. Although the regional indices do not always change congruently, the upward moves in the Philly Fed and Empire State surveys does give some hope for the Chicago region. One of the key component indices to watch is employment. Both of the two other regional surveys saw declines in this area and if Chicago reports the same trend, then next Friday's release of national nonfarm payroll changes is more likely to show weakness in manufacturing employment. The two other previously released regional surveys also reported declines in prices paid and the Chicago survey will probably follow suit. Crude prices did see a rise early in December, but it was fairly short-lived and prices receded by the second half of the month. In metals, although copper and aluminum prices rose to new highs by the start of December, they've remained fairly flat since then. The national ISM purchasing managers' index is expected to be released on January 2nd.

Previous: In November, the Chicago PMI dropped slightly to 61.7 from 62.9. Though this was better than the expected fall to 60.0, the five component indices reveal some troubling information with production, new orders, and employment all decreasing. In particular, the employment index moved to 50.3, which shows that employment growth is barely crawling along with the index being dangerously close to the neutral level of 50. Only order backlogs and supplier deliveries improved slightly. On top of this, the prices paid index soared to 94.1 from 79.6. It is now at its highest level in sixteen years. However, this did not feed into a rise in aggregate national producer price inflation. Energy prices had declined greatly over the past few months. Also, both the national and Philadelphia region's purchasing manager surveys indicated that prices had fallen in November. Overall, although business conditions had not deteriorated significantly in the month, the softening production and order growth revealed by the underlying figures show that conditions are still under pressure.

Richard Lee is a Currency Strategist at FXCM.