MNI Chicago Business Barometer Rises to 62.7 in May

--Chicago Business Barometer Up for Only Second Time This Year

--First Rise in Order Book Growth in 2018

--Production Up for Second Consecutive Month in May

--Lead Times at Six-Month High

By Jamie Satchithanantham

     LONDON (MNI) - The MNI Chicago Business Barometer rose 5.1 points to 62.7

in May, up from 57.6 in April, hitting the highest level since January.

     Business activity gained traction in May, with growth in firms' operations

up for only the second time this year. All five Barometer components

strengthened on the month, helping take the Barometer's year-over-year growth

back into the black.

     While broad based, the Barometer's gain was largely driven by an

acceleration in both output levels and orders. Having ended a run of three

consecutive falls last month, the Production indicator notched another gain on

its belt, rising to a three-month high. New Orders also increased in May, the

first sign of order book growth this year, rising to a four-month high. The two

indicators account for the lion's share of the headline index, two thirds

exactly, and stand 3.7% and 2.1% above their respective May 2017 levels.

     Having trended lower since the end of 2017, companies' unfulfilled orders

surged in May. The Order backlogs indicator ended a run of four straight

declines, which last month culminated in the indicator sitting below the neutral

mark for the first time in 12 months, rebounding to a level last seen higher in

October 2017.

     A contributory factor to the rise in backlogs was an elevated lead times on

key supplies. The Supplier Delivery Times indicator nudged higher in May, again

the highest outturn since November, up 12.4% on the year.

     Growth in firms' level of stock, meanwhile, found room to grow in May after

softening in April with some firms attributing the rise down to new products and

higher demand.

     Firms were more optimistic regarding their workforce in May. The Employment

indicator bounced from last month's six-month low and climbed higher on the

month. However, as in previous months, they continued to stress that finding

adequate workers remained challenging.

     The price of key materials continued to prove a major source of angst

amongst firms. Despite receding from April's seven-year high, the Prices Paid

indicator remains in a range last seen at these levels all the way back in 2011,

the last time it remained above the 70-mark for two straight months.

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

firms whether supply side issues were negatively affecting their business and a

clear majority, 63.0%, said yes, consistent with the survey's associated

indicators sitting at elevated levels.

     The second asked firms to assess the impact of another interest rate hike

in the next three months. Just under two thirds saw it having no impact on their

operations, while 22.9% saw it having a negative impact. Only 2.1% who saw it

assisting their business with the remainder unsure.

     "It had been a somewhat sluggish start to the year, perhaps unsurprising

after the stellar end to 2017, but the MNI Chicago Business Barometer found a

higher gear in May. Although broad based, the rise was largely thanks to a

rebound in demand and back-to-back growth in output," said Jamie Satchi,

Economist at MNI Indicators.

     "The result, however, was assisted by the intensification of supply side

constraints, with order backlogs surging and lead times on key materials up

sharply," he added.

     The survey period ran from May 1 to May 16.

--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