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The Chicago Business Barometer surged 11.7 pointsto 64.3 in August, regaining all the lost ground seen in July, and pointing to continued strength in the US economy.
Strong growth in the Barometer and three of its key components in August followed a sharp slowdown in July. As expected, it appears that the July lull was temporary and that the momentum exhibited in the Chicago Report in the second quarter has carried through to Q3.
Strong gains in Production, New Orders and Order Backlogs lifted the Barometer in August to the highest since May. Production posted the largest monthly increase on record, rising over 20 points to the highest in nearly ten years. Both New Orders and Order Backlogs rose sharply unwinding all and more of July’s weakening, with the latter moving well out of contraction.
Employment was the only component of the Barometer to fall, although it remained well above the neutral 50 level and continues to point to firm demand for labour.
With expectations for strong future demand, firms built stocks at the fastest pace for eight years. Inventories of finished goods jumped above 60 to the highest since October 2006, coupled with a fourth consecutive monthly increase in Supplier Delivery Times.
Prices Paid also inched up above 60 amid strong demand, although at this level it doesn’t point to a severe inflationary threat.
Commenting on the MNI Chicago Report, Philip Uglow, Chief Economist at MNI Indicators said, “We had speculated that July’s downturn would prove temporary rather than signal the start of a downward trend. The sharp bounceback in August, with growth in output at the highest for nearly ten years, suggests that growth in the US economy will continue apace in Q3.“
