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The MNI Chicago Business Barometer fell 1 point to 55.8 in July from the 1½-year high of 56.8 in June, led by af all in New Orders. Smaller declines were seen in Production and Order Backlogs, which offset a strong increase in the Employment component.
The Barometer’s three-month average, though, which provides a better picture of the underlying trend in economic activity, rose to 54.0 from 52.2 in Q2, the highest since February 2015.
Following strong gains in the previous month, Production, New Orders and Order Backlogs declined somewhat in July, but remained above May’s levels,when they all fell into contraction territory. New Orders fell 3.9 points to 59.3, but held most of June’s gain that had left the indicator at the highest level since October 2014. Order Backlogs, which last month rose to the highest since March 2011, managed to remain above 50 following a 16-month run of sub-50 readings.
Demand for labour picked up noticeably in July, probably boosted by the increased level of orders and output at the end of Q2. Employment jumped solidly back above 50 to the highest since March 2016, a healthy recovery after three months in contraction that had left the indicator at the lowest since November 2009.
From November 2015 through to May 2016, firms ran down inventory levels. In July, though, companies increased their inventories at the fastest pace since October 2015, building on June’s double digit gain.
Inflationary pressures were little changed on the month, with Prices Paid falling slightly for the third consecutive month.
In a special question posed to the Chicago panel, 66%said they would expect the net financial impact of Brexit on their company to be “negligible”. This was in line with the results from the national ISM which showed 61%.“
Demand and output softened somewhat in July following a solid showing in June but still out performed the very weak results seen earlier in the year. On the upside, it was the first time since January 2015 that all five Barometer components were above 50. Looking at the three-month average, the Chicago Business Barometer so far suggests economic activity running ata healthier pace in Q3,” said Lorena Castellanos, senior economist at MNI Indicators.“
Another positive came from the Employment Indicator. Although it’s still relatively weak, should July’s increase hold then it could be read as a tentative sign of growing business confidence about economic growth ahead,” she added.
