MNI Chicago Business Barometer Rises to 65.5 in July

--Chicago Business Barometer Highest Since January

--New Orders, Production Hit Six Month Highs 

--Prices Paid Highest Since September 2008

--Inventories Slip To 18-Month Low 

By Jamie Satchi

     LONDON (MNI) - The MNI Chicago Business Barometer rose to a six-month high

of 65.5 in June, up 1.4 points from June's 64.1. 

     Businesses' operations rose at a swifter pace in July, with activity up for

a fourth consecutive month. All but one of the Barometer components strengthened

on the month, with only Supplier Deliveries losing ground, leaving the Barometer

up 10.1% on the year.

     Like the headline index, both New Orders and Production recorded six-month

highs in July, traditionally a busy month for firms coinciding with the summer

holiday season. Both indicators sit comfortably above the neutral-50 mark, up

8.0% year-over-year and 10.6% year-over-year respectively, and continue to

signal robust demand.     

     Alongside a further pickup in demand growth, firms' level of unfinished

orders continued to grow. The Order Backlogs indicator capped a third straight

rise by hitting a nine-month high, with some firms reporting a demand hangover

from June, while others blamed inefficiencies in production and a lack of

employees.    

     Lead times on key materials remained significantly elevated, despite easing

marginally in July, and continue to impair firms' productive capacity. 

     Consistent with the longer wait times, stock levels of principal items

plummeted in July, falling to an 18-month low.         

     Price pressures continued to aggravate firms' operations and intensified

markedly in July. The Prices Paid indicator rose to its highest level since

September 2008. Higher prices were widespread across a range of key inputs with

multiple firms attributing the latest rise to recently implemented tariffs on

imported goods.    

     Elsewhere, firms were more intent on hiring new personnel. The Employment

indicator rose for the third consecutive month in July, settling at a four-month

high. However, despite this, there were still reports of firms struggling to

source ideal candidates, which continues to hamper overall recruitment plans.  

     --SRONGER Q3 SEEN

     This month's special question asked firms to predict whether new orders

over the coming third quarter would come in higher, in line or lower than their

respective second quarter level. Over half of firms were optimistic, expecting

Q3 demand to usurp that of Q2, with only 13.7% expecting a drop-off of some

magnitude. A little over one-in-four forecast no change while just under 6% were

unsure.  

     Many firms highlighted that Q3 covered the summer holiday period, which

typically brought in more business and an associated acceleration in growth.

Others, however, said that they expected summer to start slowly in July and

August, while others said the implementation of tariffs had whisked up

uncertainty that made forecasting slightly more difficult.   

     "The MNI Chicago Business Barometer started the third quarter in bullish

form, with business activity supported by robust demand and output. Both, like

the headline index, registered 6-month highs and the majority of firms expect

demand to increase further over Q3," said Jamie Satchi, Economist at MNI

Indicators.

     "Input prices continue to be a thorn in the side of businesses, however,

with the Prices Paid indicator at the highest in a decade and continuing to

signal pipeline inflation," he added.   

     The survey period ran from July 2 to July 19.

--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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