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Economy in Brief

U.S. Chicago Business Barometer Fell Sharply in August
by Kathleen Stephansen, CBE  August 31, 2021

• The Chicago Business Barometer fell to its lowest reading since June.

• Supply constraints remain an issue.

• Delivery speeds are slow, and prices continue to rise.

The ISM-Chicago Purchasing Managers Business Barometer dropped to 66.8 in August after rising to 73.4 in July. The Action Economics Forecast had expected a rise to 69.3 from a 65.0 projection in July. An index above 50 suggests growing business activity in the Chicago area. Haver Analytics constructs an ISM-Adjusted Chicago Business Barometer with methodology similar to the ISM Composite Index. This measure rose slightly to 63.7 in August from 63.5 in July.

Production fell sharply to a two-month low of 61.0 in August from 68.8 in July. A smaller 41% (NSA) of respondents reported a higher level of output and an increased 18% reported a decline. Firms reported that the available supply of raw material and labor is not enough to meet new orders.

New orders fell to 67.8 in August from 72.2, as demand appears to be growing at a slower pace than in July. Among the five main indicators, order backlogs posted the largest increase of 11.6 points, to 81.6 from 70.0 in July. Supplier deliveries rose 6.3 points to a three-month high of 92.8 from 86.5 in July. A fairly steady 76% (NSA) of respondents reported slower delivery speeds while none reported quicker speeds, down from 10% four months ago. Inventories rose to 48.8 in August from 42.6 in July, still indicating a contraction.

The employment index rose modestly to 48.3 in August from 47.5 in July, still indicating that firms have a hard time finding qualified workers for available jobs. The index shows a net contraction in payrolls for the fourth straight month.

Prices paid increased 2.3 points to 93.9 in August from 91.6 in July, the highest level since 1979 and reflecting higher costs for production materials.

To this month's special question "When do you expect the supply chain impact of COVID-19 to peak?", 37.8% expect it to peak in 2022.

The MNI Chicago Report is produced by MNI in partnership with ISM-Chicago. The survey is collected online each month from manufacturing and nonmanufacturing firms in the Chicago area. Summary data are contained in Haver's USECON database with detail including the ISM-style index in the SURVEYS database.

Chicago Purchasing Managers Index (%, SA) Aug Jul Jun Aug '20 2020 2019 2018
General Business Barometer 66.8 73.4 66.1 51.0 49.0 51.4 62.4
ISM-Adjusted General Business Barometer 63.7 63.5 58.9 50.1 49.6 51.5 60.8
   Production 61.0 68.8 60.0 51.8 47.9 51.3 64.6
   New Orders 67.8 72.2 66.7 54.7 47.1 52.0 63.8
   Order Backlogs 81.6 70.0 66.6 47.1 42.6 46.9 58.0
   Inventories 48.8 42.6 37.5 36.8 44.7 48.7 55.4
   Employment 48.3 47.5 44.0 41.4 41.8 49.6 55.2
   Supplier Deliveries 92.8 86.5 86.5 65.6 66.4 55.6 64.8
   Prices Paid 93.9 91.6 91.9 56.6 59.5 58.5 74.0
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