MNI Chicago Business Barometer Eases to 63.6 in August

--Chicago Business Barometer Slips for First Time in Five Months

--New Orders, Production Hold Up Despite Barometer Fall 

--Prices Paid Down but Still Above 80-Level

--Backlogs, Delivery Times Ease on the Month 

By Jamie Satchi

     LONDON (MNI) - The MNI Chicago Business Barometer slipped to a three-month

low of 63.6 in August, down 1.9 points from July's 65.5. 

     Firms' operations continued to grow at a healthy pace in the month, despite

decelerating for the first time in five months. A softening in Supplier

Deliveries, Order Backlogs and Employment offset gains in Production and New

Orders, driving the decline in the Barometer. However, it still sits 6.9% higher

on the year and continues to signal robust business conditions.

     August saw both demand and output inch higher, though broadly unchanged

from the already-elevated July levels. Despite registering only minor changes on

the month, the New Orders indicator is up 6.4% on the year while the Production

indicator posted a 9.1% y/y rise 

     For firms not encountering a significant rise in orders, it offered the

chance to catch up on existing, unfinished orders. The Order Backlogs indicator

snapped a three-month winning run in August, receding from July's nine-month

high. Elevated demand, difficulty sourcing key materials and labour

inefficiencies have forced unfinished orders higher in recent months, with these

factors remaining largely intact in August.    

     The Supplier Deliveries indicator fell for a second straight month in

August but remained above the 60-level, where it has stood for 11 of the past 12

months. This, in part, explained why stock levels rebounded in August, returning

to expansionary territory after slipping to an 18-month low in July. Worries

over the availability of key materials led some firms to stockpile, while others

did so to keep pace with orders. 

     --HIRING INTENTIONS

     On the hiring front, firms continued to expand their workforce in August,

despite the Employment indicator easing from July's four-month high. The

indicator has remained above the neutral-50 threshold for 10 consecutive months,

the longest stretch since April 2015.  

     Firms' productive capacity continues to be restrained by elevated input

prices. While the Prices Paid indicator eased somewhat in August, it remained

above the 80-mark for just the second time since late-2008. Firms continued to

report elevated prices across a wide range of materials, from steel to resin,

with many citing allocation issues stemming from ongoing trade disruptions as a

key reason.    

     This month, two special questions were put to firms. The first asked

whether they had passed on higher input costs to consumers and over 60% of those

who responded said yes. Of those who said no, many said that they had not done

so due to intense competition, while others said they may be forced to implement

hikes in the coming months having, up until now, resisted doing so.   

     --STOCK LEVELS

     This month's second special question asked firms for their assessment of

their current level of stock. While just under three-fifths said what they held

was about right, a fifth thought their inventory level was either too high or

too low.    

     "The MNI Chicago Business Barometer continues to signal solid business

sentiment, despite easing for the first time in five months, with growth in

output and demand holding up well," said Jamie Satchi, Economist at MNI

Indicators.

     "Inflationary pressures look set to continue, potentially bleeding into

consumer prices, with over 60% of firms reporting that they have passed on

higher input costs to customers in recent months, and others foreseeing doing so

in the near future," he added. 

     The survey period ran from August 1 to August 21.

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

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

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