We now have our explanation on last week’s disappointing manufacturing data.
The February ISM manufacturing index fell to 52.9 from 53.5, but the real downer was the Chicago PMI report, which came in at 45.8, the first contraction for the Midwest region since April 2013.
Some economists including Pantheon Macro’s Ian Shepherdson had said the West Coast port strikes likely played a factor. Shepherdson said last week, “We blamed the drop in the Chicago PMI mostly on the severe weather in our initial note, but a closer look suggests the disruptions at west coast ports probably played a big role.”
The Federal Reserve’s beige book published on Wednesday seems to confirm that view.
Here’s what various districts said about the impact of the strike:
“The Chicago and San Francisco Districts noted that labour disputes at ports along the West Coast have also had a negative impact on exports.”
Also from Chicago:
Transportation disruptions at West Coast ports related to the longshoremen labour contract negotiations delayed delivery of some retail items and led some manufacturers to hold higher levels of inventories as a precaution.”
And in San Francisco, where some of the affected ports are located:
“Merchants in some areas showed very strong holiday sales and would have seen even larger volumes if not for delays receiving merchandise caused by labour disputes at West Coast ports.”
Also, “Numerous contacts reported that the labour disputes at West Coast ports reduced agricultural exports, as perishable products such as fruits wasted away in storage containers waiting for shipment.”
A temporary deal was reached last month after the nine-month dispute over contract renewals.