The Chicago Business Barometer made a positive start to the second quarter, rising by 6.0 points to 52.3 in April, the highest since January, and further distancing itself from February’s 5½-year low.
The Barometer was supported by gains in four of its five components including a double digit gain in New Orders that reversed around two-thirds of February’s sharp drop. Order Backlogs also rose strongly but remained below the 50 breakeven line, a reflection of the recent downturn in orders. Production moved out of contraction and the strong gain in New Orders should help to underpin output over the coming months.
Feedback from panellists was very mixed. Comments from service sector companies were more positive than manufacturers.
In line with the improvement in orders and output, Employment increased to the highest since January, following the slump in February and March that affected nearly all of the indicators in the survey as growth in the US economy decelerated sharply in Q1.
Lead times for Supplier Deliveries declined for a second month, although an overwhelming majority of survey panellists reported that they were unchanged from last month. Quicker lead times were due in part to better weather, a resumption of normality following the disruption of the West Coast port strike and the Chinese New Year. In contrast, days to source Production Materiel rose for the second month and to the longest since August 2014.
Following a sharp increase in March, inventories of finished goods edged slightly lower in line with the pick-up in orders in April after weaker sales than expected in the previous two months.
Disinflationary pressures intensified in April as Prices Paid contracted at a faster rate, hitting the lowest level since July 2009. Some purchasers cited weakness in oil and steel related products.
In a special question posed in April, half of the panel thought that a rate hike by the Fed over the next six months would have no impact on their business as it had already been factored in.
Chief Economist of MNI Indicators Philip Uglow said, “The bounce back in activity at the start of Q2 is consistent with a resumption of normal activity following the poor weather and port strikes earlier in the year. In percentage terms, the April jump is similar to last year, although the level of activity is lower overall.“
