MNI Chicago Business Barometer Declines to 65.7 in January

--Chicago Business Barometer Lowest Since November

--Production, New Orders Both Soften in January

--Employment Highest Since February 2012 

--Prices Paid at Four-Month High 

By Les Commons

     LONDON (MNI) - 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 to the form 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. 

     --LONGER DELIVERY TIMES  

     Even with the softer pace of activity in January, supplier delivery times

lengthened, reversing most of the fall the associated indicator delivered a

month prior.  

     The pace at which firms added to their inventories were marginally lower in

January after hitting a three-year high in December. While some reported that

they were cutting back on their inventory levels, others said they looked to

increase stock in preparation for product launches due later this year. 

     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. Of the firms who chose to hire personnel, reasons varied from

needing extra workers to service higher demand to being able to draw on fresh

budget funds.     

     This month's special questions asked firms to gauge the likely effects of

prospective monetary and fiscal policies. With more than one rate hike pencilled

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.

     --TAX BILL BONUS

     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 among

the materials 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, confidence 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.

     The survey period ran from January 2 to January 22.

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

[TOPICS: M$U$$$,MT$$$$,MX$$$$]