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Chicago Purchasing Managers Index remained stable at 58.9 in August


The MNI Chicago Business Barometer remained stable at July’s 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 sentiment. Apart from Employment, all other components of the Barometer were above their respective levels seen last August with 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 following the 23-year high set in June. Suppliers took slightly less time to deliver key inputs, with the respective indicator down to hit 59.3, 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 contraction, hitting the lowest level since the start of the year.

The Employment indicator slipped for the third month in a row in August, falling below 50 for the first time since March. Though the indicator has performed materially better since the start of 2017, the indicator’s recent slide raises concerns about the adequacy of well trained workers.

This month’s special question asked firms about their current level of inventories. 16% of firms said they were carrying too little, while the majority, at 57.4%, said their inventory level was about right. That left 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.




Posted: August 31, 2017 Thursday 09:45 AM




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