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The MNI Chicago Business Barometer fell 2.1 points to 65.7 in January from a previously revised 67.8 in December.
Despite losing some ground in January, the Barometer continued in the same vein of form it displayed in the second half of 2017, making for an encouraging start to the New Year. The Barometer was up 28.3% on last January and at 65.7, stands above the H2 2017 average of 63.7.
Three of the five components that comprise the Barometer fell on the month, with only Employment and Supplier Deliveries notching up gains in January.
Firms reported a moderately slower pace of both incoming orders and output in January. The New Orders indicator fell to a five-month low, contributing most to the Barometer’s decline, while the Production indicator also fell in January, albeit to a lesser extent. With less activity on these fronts it gave firms the chance to target their backlog of unfilled orders. The Order Backlogs indicator fell to its lowest level since May.
Despite the softer pace of activity in January, supplier delivery times lengthened while the pace at which firms added to their inventories was marginally lower in January, after hitting a three-year high in December.
Elsewhere, hiring intentions were on the rise in January. The Employment indicator hit a near-six-year high, breaking past the 60-mark for the first time since late 2013.
This month’s special questions asked firms to gauge the likely effects of prospective monetary and fiscal policies. With more than one rate hike penciled in for 2018, firms were asked how this would likely impact their business. While the majority saw it having no effect on their business, just 3.8% felt they would be hindered by higher rates compared to 37.7% who saw their activity continuing to expand.
Firms were also asked how they thought the government’s impending tax reform bill would impact both their business as well as the wider economy. A clear majority, 63.5%, saw both parties reaping the benefits of less red tape, followed by 11.5% who felt that while beneficial to them it may not be in the best interests of the country. Just under 6% felt it would be bad for both their business and the US economy.
Inflationary pressures at the factory gate intensified again in January, rising to the highest level since September. Steel, wood and resin were said to have increased in price.
“Official data in Q1 tends to come in weaker than in reality, but our survey suggests that despite softening a little, sentiment among businesses remains robust. This was the best January result in seven years, capped off by the Employment indicator rising to its highest level in almost 6 years,” said Jamie Satchi, Economist at MNI Indicators.
“Still, inflationary pressures remain elevated and show no signs of abating, something that should be at the forefront of the Fed’s mind,” he added.
