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The MNI Chicago Business Barometer increased to 58.3 in April from 57.7 in March, the highest level since January 2015.
Optimism among firms about business conditions rose for the third month in a row. Three of the five Barometer components led April’s increase, with Production and Order Backlogs receding.
Demand continued to gain ground in April, rising for the third consecutive month. New orders rose by 5.5 points, to touch almost a three-year high. Off the back of two consecutive rises, the Production indicator fell
2.2 points to 59.5 from 61.7 in March. Order Backlogs contracted for the fifth consecutive month, although at a much faster rate than in recent months. Suppliers took longer to deliver key inputs, with the respective indicator 1.6 points higher at 56.0 in April.
Amid rising orders, demand for labor picked up. The Employment indicator leapt out of contraction territory after a brief dip below 50 last month. Although the indicator has expanded only seven times in last 24 months, it is showing tentative signs of a pick-up, sitting above 50 in two of the last three months.
April’s special question asked firms about the impact of an interest rate hike by the Federal Reserve in the next six months on their business. More than half of respondents expected to remain unaffected, 22% expected to be negatively impacted, 18% were unsure while only 6% expected to benefit from a rate hike. When a similar question was posed in April last year, 36% of respondents expected no impact and an equal proportion were unsure of the affect.
The Federal Reserve raised interest rates in March for only the third time in a decade and are projected to hike two more times this year. Firms in our panel were more confident about higher rates and appear to have already estimated the impact on their financing costs.
Factory gate prices eased for the second consecutive month, though remain elevated. Prices Paid were up almost 14% on the year and continue to trend upwards, although the growth rate has eased recently.
“The April Chicago report showcased another impressive month, with firms reporting solid growth. Rising demand and firm production led to a pick-up in hiring by firms. Although the employment indicator has been bumpy, in and out of contraction, if the current month’s rise is sustained, it could provide a boost to the labor market,” said Shaily Mittal, senior economist at MNI Indicators.
