MNI Chicago Business Barometer Up Sharply to 65.2 in September

--Chicago Business Barometer 61.0 Q3 VS 61.1 Q2

By Jamie Satchithanantham

     LONDON (MNI) - The MNI Chicago Business Barometer rose to 65.2 in

September, up from 58.9 in August, hitting the highest level in three months and

the second highest level in more than three years.

     Optimism among firms about business conditions was bolstered in September

after August's flat showing, with each of the Barometer's sub-components

strengthening. A marked rise in Order Backlogs, up to a 29-year high, was among

the month's highlights. September's survey result left the Q3 calendar average

of the Barometer at 61.0, virtually unchanged from Q2's three-year high of 61.1.

     The sharp rise in sentiment was the result of widespread gains, though

particularly concentrated in demand, backlogs and employment. Together, these

account for 60% of the headline Barometer. The increases in Production and

Supplier Deliveries, accounting for the remaining 40%, were slightly more modest

in comparison.

     Four of the five Barometer components rose to levels just shy of their

respective highs set in June, with only Order Backlogs surpassing its own,

hitting a level not seen since July 1988. Output and New Orders rose for the

second consecutive month in September while the recent barrage of storms across

the country was reported to have weighed on delivery times.

     The adverse weather conditions also led some companies to stockpile goods

as a precautionary measure. The Inventories indicator rose by 8.4 points to

56.9, the highest level since March.

     After three consecutive monthly falls, the Employment indicator returned to

above-50 territory in September. Despite the rise, companies continued to report

difficulty in finding suitable, skilled workers alongside evidence of firms

hiring temporary staff and staff working overtime hours.

     This month's special question asked firms about their perceptions of

supplier delivery times in the final quarter of the year amid the storms in the

Texas/Louisiana region. At 58.6%, the majority of firms said they expected

delivery times to remain unchanged, with 38% believing delivery times would

lengthen by some degree and some reporting that they were already experiencing

disruption across container/trucking routes. The remaining 3.5% forecasted

delivery times to shorten over Q4.

     Inflationary pressures at the factory gate rose markedly in September to a

level not seen since July 2011. Elevated commodity prices alongside the more

immediate hurricane-induced materials shortages appear to be behind the

increase.

     "The strong outturn in September means that on a quarterly basis business

activity was broadly unchanged from an already impressive Q2. Looking forward,

firms are on record expecting a busy Q4 despite disruptions caused by the recent

storms, with just a handful expecting delivery times to lengthen from October

through December," said Jamie Satchi, Economist at MNI Indicators.

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