Chicago Business Barometer Steady in August

Written by Sandy Williams

The MNI Chicago Business Barometer was unchanged in August at 58.9 after a July plunge that ended five months of increases.

Slight gains in production and orders were offset by declines in backlogs, employment and supplier deliveries. The inventory loss was significant, dropping the index 6.4 points to end in contraction and the lowest reading of the year. Limited inventory caused delays satisfying orders, according to some companies.

Employment dipped below 50, falling for the third month and slipping into contraction for the first time since March.

Inflationary pressures eased during the month and have been on a downward trend since the beginning of the year.

“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 U.S. 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 Chicago Business Barometer, published monthly by MNI Indicators and also referred to as the Chicago PMI, is a composite diffusion indicator made up of the Production, New Orders, Order Backlogs, Employment and Supplier Deliveries indicators and is designed to predict future changes in U.S. gross domestic product. An indicator reading above 50 indicates expansion compared with a month earlier, while below 50 indicates contraction. A result of 50 is neutral. The further an indicator is above or below 50, the greater or smaller the rate of change.

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