MNI Chicago Business Barometer Rises to 64.1 in June

--Chicago Business Barometer Highest Since January

--New Orders Up For Second Month In a Row

--Production Moderates but Remains Robust

--Survey Shows Lead Times, Backlogs Higher in June

By Jamie Satchithanantham

     LONDON (MNI) - The MNI Chicago Business Barometer rose 1.4 points to 64.1

in June, up from 62.7 in May, hitting the highest level since January.

     Business activity expanded at a faster pace in June, with firms' operations

up for a third consecutive month. Four of the five Barometer components

strengthened on the month, with only Production losing ground, leaving the

Barometer up 0.8% on the year.

     Partially spurring the Barometer's rise was an increase in orders, up for a

second straight month to settle at a five-month high. Offsetting this was a

slight fall in output growth. Production lost ground for the fourth time since

peaking in December, with firms stifled by issues higher up in the supply chain.

     With demand growth recapturing some lost momentum, firms' unfulfilled

orders continued to grow. The Order Backlogs indicator built on last month's

sizeable gain with another in June, to sit 11.4% higher versus June 2017 and

10.8% higher in the three months to June versus its Q1 average.

     Largely explaining firms' lower productive capacity and inability to

service demand, lead times on key supplies refused to abate. The Supplier

Deliveries indicator inched higher again in June, consistent with the

indicators' highest quarterly reading in fourteen years.

     Growth in firms' level of stock, meanwhile, expanded at a softer pace in

June, with some firms unable to replenish items quickly enough.

     One key factor behind the supply-side friction encountered by firms are

elevated input prices. The Prices Paid indicator rose to its highest level since

May 2011. The third straight month above the 70-threshold means that the

indicator stands at a seven-year high on a quarterly basis as well.

     On the jobs front, firms were more willing to add to their workforce. The

Employment indicator rose for the second month in a row in June, although hiring

sentiment did dip on the quarter.

     This month, two special questions were posed to firms.

     The first asked whether ongoing trade talks were having an impact on

short-term purchasing decisions. Just under a quarter of firms said that they

were having a significant impact on business while an additional 39.2% said yes,

but only to a minimal extent up until now. Just 17.7% said they had been immune

to any disruptions, with the remaining 19.6% unsure.

     The second question asked firms if they had increased starting salaries to

attract and secure prospective employees. The majority of firms, at 61.4%, said

that had yet to resort to this measure but a fairly sizeable 38.6% said that

this was a strategy they had turned to.

     "Stronger outturns in May and June left the MNI Chicago Business Barometer

broadly unchanged in Q2, running at a pace similar to that seen throughout 2017.

While impressive, supply-side frustrations are undermining firms' productive

capacity," said Jamie Satchi, Economist at MNI Indicators.

     "Confusion surrounding the trade landscape continues to breed uncertainty

among businesses and their suppliers and has led to many firms' altering their

immediate purchasing decisions," he added.

     The survey period ran from June 1 to June 18.

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

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