MNI Chicago Business Barometer Unchanged at 58.9 in August

--Both Production, New Orders Components Increase

     LONDON (MNI) - The MNI Chicago Business Barometer remained stable at the

July level of 58.9, the joint-lowest level since April.

     While marking the eighteenth consecutive above-50 reading, this month's

unchanged result follows July's sharp decline that snapped a run of five

straight monthly increases in business optimism. Apart from Employment, all

other components of the Barometer were above their respective levels seen last

August and all of them were above their January levels, pointing to robust

confidence among US firms.

     The stability in sentiment was the result of gains in production and demand

being offset by losses in backlogs, employment and supplier deliveries. Both New

Orders and Production increased slightly, following hefty falls last month.

Firms also saw the level of backlogs fall in August. 

     The Order Backlogs indicator fell for the second consecutive month having

previously set a 23-year high in June. Suppliers took slightly less time to

deliver key inputs, with the respective indicator at 59.3, falling for the

second consecutive month to hit a four-month low.

     Companies saw stock levels fall significantly in August. Some companies

reported that they could not satisfy odd requests or huge orders in a timely

fashion due to limited inventory. The Inventories indicator fell by 6.4 points

to dive into contractionary territory, hitting the lowest level since the start

of the year.

     The Employment indicator slipped for the third consecutive month in August,

to enter the sub-50 zone for the first time since March. Even though the

indicator has performed materially better since the turn of the year, having

spent eight months of last year below the neutral-50 mark and averaging 49.2 in

the first eight months of last year compared with 52.5 in the same period this

year, the continuous slide in the indicator raises concerns about the adequacy

of well qualified, trained workers.

     This month's special question asked firms about their current level of

inventories. Of all firms, 16% said they were carrying too little inventory,

while the majority, at 57.4%, said their level was about right. That left the

remaining 26.2% of firms reporting stock levels to be too high.

     When the same question was posed in November 2015, 44.2% of firms reported

having too high inventories while 53.9% held the right level of inventories.

That meant only 2% deemed their stock levels to be limited, in contrast to the

current year where higher demand expectations have warranted firms to hold

higher inventories.

     Having picked up last month, inflationary pressures at the factory gate

eased slightly again in August. Since the turn of the year, the survey shows

that the indicator has been on a downward trend, in line with FOMC's concerns

over the weaker inflation data in the last few months and inflation expectations

tilted to the softer side.

     "Following the sharp rise in the Barometer to a more than three-year high

in June it isn't too surprising to see activity subsequently ease somewhat.

However, overall, the trend remains firm, consistent with the growth story of

the US. The disappointment comes from the employment indicator which once again

contracted, the sixth time in the last 12 months, with fewer firms expecting an

increase in hiring," said Shaily Mittal, Senior Economist at MNI Indicators.

     The survey period ran from August 1 to August 21.

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

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