U.S. Chicago Business Barometer Improves Modestly in July
by:Tom Moeller
|in:Economy in Brief
Summary
- Index remains below expansion level.
- New orders & production indexes rise; employment declines.
- Prices paid index rebounds.
The ISM-Chicago Purchasing Managers Business Barometer rose to a seasonally adjusted 42.8 during July after improving to 41.5 in June. Nevertheless, it has remained below 50 (the break-even point for rising vs. falling activity) for eleven consecutive months. The index peaked at 71.3 in May 2021. A reading of 43.2 had been expected in the Action Economics Forecast Survey.
Haver Analytics constructs an ISM-Adjusted Chicago Business Barometer with methodology similar to the ISM Composite Index. This measure fell to 41.4 in July from 43.0 in June, indicating a decline in business activity overall in recent months. The latest reading remains below a 64.4 high in October 2021.
The production measure improved to 45.1 after rising to 42.6 June. A steady 22% (NSA) of survey respondents reported higher production while a lessened 26% reported a decline. The new orders measure rose to 43.0 after holding fairly steady at 39.6 in June. A lessened 17% of survey respondents reported more new orders while a fewer 33% reported declines. The order backlog index improved to 35.8 from 33.1 in June. Just four percent of survey respondents reported higher backlogs while 30% reported a decline.
Working lower, the employment index fell to 39.7 after declining to 45.6 in June. It was the lowest level since February, down from the recent high of 51.2 in April. Twelve percent of respondents reported more hiring while 31% reported less. The inventories reading of 34.2 was reduced from 38.2 in June and stands well below its high of 66.6 in May of last year. Nine percent of respondents reported higher inventory levels while 41% reported a decline. The supplier-delivery series fell to 44.8 from 48.8 in June. A steady twelve percent of respondents reported slower delivery speeds while a higher 20% reported an increase.
Inflation pressures picked up in July. The prices paid index rose to 62.1 after falling to 53.5 in June. The index remained below the high of 94.6 in November 2021. A fairly steady 28% (NSA) of respondents reported an increase in prices, while a greatly lessened four percent reported lower prices.
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.
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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