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Economy in Brief

U.S. Chicago Business Barometer Drops for the Third Time in Four Months in July
by Winnie Tapasanun  July 29, 2022

• Down 3.9 pts. to 52.1 in July, lowest since Aug. '20; drops in index components except employment.

• Production, at 48.2, posts its first contraction in two years.

• New orders contract for the second consecutive month following 23 straight expansions.

• Employment expands for the second straight month following six successive contractions.

• Inflation pressures persist w/ prices paid at an elevated-level 81.9.

The ISM-Chicago Purchasing Managers Business Barometer fell to 52.1 in July from 56.0 in June and 60.3 in May. The July reading, below the peak of 73.3 in May 2021 and 71.8 in July 2021, was the lowest level since August 2020. The Action Economics Forecast Survey had expected 55.3 for July. Haver Analytics constructs an ISM-Adjusted Chicago Business Barometer with methodology similar to the ISM Composite Index. This measure was at an expansion-level 52.7 in July, the third m/m fall in four months, down from 57.8 in June and 63.4 last July.

The production index fell to 48.2 in July from 55.2 in June and 67.3 last July, registering its first contraction since July 2020's 47.8. The new orders index decreased to 44.5 this month from 49.9 in June and 71.0 last July, posting its second straight monthly contraction at a deeper pace. Twenty-three percent of respondents (NSA) reported higher orders while an increased 36% reported a decrease. The orders backlog index fell to a contraction-level 48.4 this month, the lowest reading since August 2020, from 55.2 in June and 69.4 last July. The supplier deliveries index declined to 67.1 this month, the lowest reading since October 2020, from 69.1 in June and 85.6 last July. An increased 53% of respondents (NSA) reported slower product delivery speeds while 17% reported faster delivery speeds. The inventories index dropped to a contraction-level 47.7 this month, down 16.2 pts. from an expansion-level 63.9 in June but slightly up from a contraction-level 44.0 last July. In contrast, the employment index rose to 56.1 in July, its second consecutive m/m expansion, up from 50.7 in June and a contraction-level 48.9 last July but marginally down from October's recent high of 56.4. An increased 28% of respondents (NSA) reported higher employment while 19% reported less hiring.

Inflation pressures continued to persist this month. The prices paid index rose to at an elevated-level 81.9 in July after declining to 79.6 in June. It was modestly below a 94.1 high in October and 91.4 last July. Sixty-six percent of respondents (NSA) reported higher prices paid while only 3% reported price declines.

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. The Chicago Business Barometer is considered to be a leading indicator of the U.S. economy. An indicator reading above 50 indicates expansion while below 50 suggests contraction. Summary data are contained in Haver's USECON database with detail including the ISM-style index in the SURVEYS database. The expectations figure from the Action Economics Forecast Survey is in the AS1REPNA database.

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