By Denny Gulino
WASHINGTON (MNI) – The arm of the Frankfurt exchange Deutsche
Boerse that sells capital market data worldwide is taking over
production of a key monthly U.S. economic indicator, the Chicago
Business Barometer popularly known as the Chicago PMI, it was announced
Monday.
“Deutsche Boerse has acquired the assets of Kingsbury International
Ltd, a U.S.-based business and economic consulting firm known for
creating and releasing the monthly Chicago Business Barometer” for
ISM-Chicago, the name of the Chicago affiliate of the Institute for
Supply Management, Deutsche Boerse announced.
ISM-Chicago’s new president, Patricia Horvath, said, “ISM-Chicago
welcomes Deutsche Boerse as a partner in the future development of the
Chicago Business Barometer as a leading indicator of U.S. economic
activity.”
Institute for Supply Management members, typically senior
management in firms of all sizes with ties to the Chicago region, have
been contributing their company data to create the Chicago indices since
1945. Kingsbury’s founder, economist Jack Bishop, has been increasingly
involved in the design, production and analysis of the Chicago report
since 1976.
The May 31 report dropped sharply, with the headline business
activity index reading 56.6, lower than expected and well down from
April’s 67.6. The production index, at 56.0, showed its second-largest
pullback in a decade. The next report, for June, will be issued
Thursday.
In all the report provides 11 different categories of data on
business conditions, from “Production” and “Employment” to “Prices
Paid.” The data is seasonally adjusted and includes comments from
respondents.
ISM-Chicago past President Steven Brundridge and Executive VP Dan
Martin, involved in the transition, said the new arrangement,
incorporating the extensive data processing and analytical skills of
the Deutsche Boerse organization, will allow its further development.
“This transfer provides platform stability and the potential to provide
a broader audience for this key economic data,” Brundridge said.
Deutsche Boerse Managing Director of Market Data and Analytics
Holger Wohlenberg said, “With this transaction, we are able to offer our
customers direct access to an important U.S. data source.”
Deutsche Boerse did not disclose the acquisition cost other than to
say it was for a “U.S. dollar amount in the single-digit million range
that includes a performance-related payment.”
Deutsche Boerse Head of Market Data Georg Gross told MNI that,
using the considerable resources of one of the world’s leading exchange
organizations, “We believe we can make this a globally relevant
indicator.” The Market Data division has already developed sentiment
indicators for China — the Market News International China Business
Survey, retail measures for the U.S., delivers hundreds of other data
series from the U.S. and around the world as well as more than 3,700
stock market and alternative market indices.
“It is always our aim to provide new indicators which add
something, providing our customers with meaningful data and
market-moving content,” Gross said. In this case, he added, Deutsche
Boerse is providing the world of finance as well as policymakers “an
indicator already well known and established, one that we strongly
feel is not only relevant for the U.S., but for Europe, Asia and Latin
America as well.”
While maintaining exactly the same distribution procedures employed
by Kingsbury, Gross said, “We would like to bring this to the next
level, broadening the indices underlying the indicator and providing it
to a broader customer base with additional distribution channels.”
Deutsche Boerse market data is already delivered in several ways,
including low-latency machine-readable feeds — called AlphaFlash — to
trading room computers, via the Internet, on voice channels and the
usual leased data lines.
Economist and Kingsbury founder Bishop, after more than three
decades of monthly reports, will remain as a consultant to Deutsche
Boerse.
One of the component indices, vendor performance (also known as
Supplier Deliveries), was identified by the developer of the leading
indicator concept, business cycle researcher Geoffrey Moore, as one of
the original 12 leading indicators in the 1970s “But I thought the
survey had more to offer than only the Vendor Performance index,” Bishop
told MNI, “and that’s how the Chicago Business Barometer was conceived.”
“In the early days, the data was delivered by fax,” he continued.
“We had about seven subscribers. If you were first on the list, you got
the data at 8 a.m. If you were seventh, it was more like 9 a.m. But if
you were last this month, you’d be first next month. We’ve always
adhered to a principle of fairness,” Bishop said.
The Chicago PMI numbers are closely tracked by traders and analysts
for clues to the national ISM index numbers which follow it by a day and
with which the Chicago report has been shown to be highly correlated.
However, the Chicago Business Barometer debut in January 1981 actually
predated the national ISM PMI. It is also often followed as a proxy for
the auto industry, “incorrectly, I believe,” Bishop said.
The data, he said, is provided by a broad array of firms across the
size spectrum, many of which have international reach, and many of which
have huge — sometimes predominant — services industry components.
Their operations may span regions far beyond the Chicago area, all
making it more than a Chicago-Great Lakes-Midwest manufacturing survey.
Deutsche Boerse’s Gross agreed. “We feel it’s very good data, a
leading indicator for the entire U.S. economic picture,” he said,
“condensed into the Chicago Barometer. So from what we’ve seen, it’s not
only manufacturing, but an indicator for the entire economy.”
The report’s diffusion indices are seasonally adjusted and, like
the national ISM reports on manufacturing and services, suggest
expansion with reading above 50 and contraction below 50.
Before publication each month the results are reviewed by the
ISM-Chicago survey committee which frames the accompanying commentary.
Members of the non-profit ISM-Chicago organization benefit from
continuing education opportunities, subscribe to a Code of Conduct for
procurement management professionals as well as contribute the
company-by-company reports that make up the Chicago Business Barometer.
Tony Mace, the managing editor of worldwide financial news service
Market News International, which is also owned by Deutsche Boerse, said,
“In our many years of alerting market participants and the general
public to the Chicago Business Barometer, it has always been a reliable
gauge to the state of the economy, previewing what’s revealed by
subsequent indicators through every year.”
Headlines that carry the Chicago numbers to MNI readers at 9:45 ET
like those of other news services, are a primary conduit to the world at
large. Subscribers to the Chicago Report,including the news media,
receive the data by conference call and email. Additionally, MNI
Monitor is a Web-based compendium of the most important breaking
economic data from around the world, including the Chicago Business
Barometer.
MNI’s Director of Economic Data Kevin Kastner said, “I’ve always
followed the Chicago numbers closely because they’re unfailingly
crucially important to our readers. I look forward to further
development under Deutsche Boerse because there’s obviously a lot of
very useful underlying data there.”
Deutsche Boerse also owns another U.S. based financial news
service, Need to Know News, which specializes in the high-speed delivery
of market-sensitive data to so-called algo traders, whose computer
algorithms allow trading on the data within small fractions of a
second of publication.
** Market News International Washington Bureau: 202-371-2121 **
[TOPICS: M$U$$$,MAUDS$,MI$$$$]