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The MNI Chicago Business Barometer fell 4.3 points to 51.5 in August from 55.8 in July, led by a large setback in Order Backlogs and a deceleration in New Orders.
Four of the five Barometer components fell between July and August. Only Employment increased, hitting a 16-month high. The latest fall left the Barometer, New Orders and Production running at the slowest pace since May, when they all slipped below 50.
Order Backlogs fell 14.5 points to 41.7, moving back into contraction territory to the lowest level since April. Backlogs were above 50 for only two months following a 16-month run of sub-50 readings. New Orders and Production also subtracted from the Barometer. Although both remained in expansion, they were much softer than at the end of Q2.
Supplier Deliveries were little changed on the month while the three buying policy measures shortened, a positive for businesses but another indication of weaker overall activity.
Building on July’s strong pickup, Employment rose to the highest level since April 2015. Adding to this, August’s special question showed a few Chicago panellists were slightly less pessimistic than a year ago about hiring over the next three months. Although most companies reported they were not planning to hire, this percentage fell to 58% from 63% a year ago. Also, those who said they plan to add both temporary and permanent employees rose to 21% from 15% a year earlier.
Fewer firms expanded their inventory levels, with the indicator falling just below 50, having increased to the highest since October 2015 in July.
Inflationary pressures eased slightly for the fourth consecutive month, leaving Prices Paid at the lowest level since March 2016.
“Economic activity slowed down into the summer, suggesting June’s momentum was only a temporary revival in activity. Overall, it wasn’t a rosy month, with Employment the only measure that gained traction. On a trend basis, though, the July-August growth rates paint a slightly better picture – albeit still weak – than that seen earlier in the year,” said Lorena Castellanos, senior economist at MNI Indicators.
