MNI Chicago Business Barometer 58.9 in July vs 65.7 in June

--First Decline in Business Confidence in Six Months

--New Orders Lowest Since February 

--Prices Paid Rise; Highest Since April

By Jamie Satchithanantham

     LONDON (MNI) - The MNI Chicago Business Barometer fell to 58.9 in July from

65.7 in June, the lowest level in three months.

     While marking the seventeenth consecutive above-50 reading, July's fall

snapped a run of five straight monthly increases in business optimism. Each of

the five Barometer components receded from last month, but remained above their

respective 12-month averages. This, therefore, points towards a return to trend

after June's stellar showing. The Barometer had risen 6.3 points in June, to the

highest level since May 2014.

     July's result means sentiment must average 62.2 in both August and

September for Q3 to come in flat on Q2.

     The fall in sentiment was broad-based in July, though particularly

concentrated across both demand and output. New orders fell by 11.6 points to

60.3, the lowest level since February, while Production fell 6.9 points to 60.8,

the lowest since April. Firms also saw the level of backlogs slip in July. 

     The Order Backlogs indicator fell 4.9 points from June's 23-year high to

57.9 in July. Suppliers took slightly less time to deliver key inputs, with the

respective indicator down to 61.5 from 62.8 in June, falling for the first time

in five months.

     Companies saw stock levels accumulate as the growth in demand cooled

slightly. The Inventories indicator rose by 3.0 points to 54.9 in July, the

highest in two months. The Employment indicator slipped for the second straight

month in July, following up June's 0.5 point drop with a further 4.0 point drop

this month. 

     This left the indicator at 52.6, the lowest since March but marginally

above its 12-month average of 52.1.The indicator has performed materially better

since the turn of the year having spent eight months of last year below the

neutral-50 mark.

     This month's special question asked firms how wages across their business

had changed over the past year. Just over 70% said they had increased employees'

nominal pay during this time while a quarter said they kept wages unchanged.

That left the remaining 3% of firms choosing to cut wages by some extent. Of

those that afforded wage rises to their employees, just under 40% increased

wages by 1-2%, with just shy of 30% of firms offering a more generous 3-4% hike.

Precisely 1.7% of businesses upped nominal wages by 1% while an equal proportion

opted for the other extreme, raising wages by 5-6%.

     Having eased in Q2, inflationary pressures at the factory gate picked up in

July. The indicator rose 3.4 points to 60.9, the highest level in three months.

     "MNI's July Chicago Business Barometer should be viewed in the context of

the underlying, upward trend in business sentiment witnessed since early 2016.

Key indicators, despite reversing their June reading, remain above their

respective averages set over the past year and suggest confidence among U.S

firms remains robust," said Jamie Satchi, Economist at MNI Indicators.

     The survey period ran from July 3 to July 18.

     For more information please email info@mni-indicators.com. Call on +44 203

865 3813.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

--MNI London Bureau; +44 203-586-2226; email: jamie.satchithanantham@marketnews.com

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