July 2017 Chicago Purchasing Managers Barometer Declines

The Chicago Business Barometer declined – now 58.9 in July from 65.7 in June. This survey came in below expectations.

From Bloomberg / Econoday, the market expected the index between 58.0 to 65.3 (consensus 62.0) versus the actual at 58.9. A number below 50 indicates contraction. Jamie Satchi, economist at MNI Indicators stated,

MNI’s July Chicago Business Barometer should be viewed in the context of the underlying, upward trend in business sentiment witnessed since early 2016. Key indicators, despite reversing their June reading, remain above their respective averages set over the last twelve months, and point towards robust confidence among U.S firms.

From ISM Chicago:

While marking the seventeenth above-50 reading, July’s fall snapped a run of five straight monthly increases in business optimism. Each of the five Barometer components receded from last month but remained above their respective 12-month averages. This, therefore, points towards a return to trend after June’s stellar showing. The Barometer had risen 6.3 points in June, to the highest level since May 2014. July’s result means sentiment must average 62.2 in August and September for Q3 to come in flat on Q2.

The fall in sentiment was broad-based in July, though particularly concentrated across both demand and output. New orders fell by 11.6 points to 60.3, the lowest level since February, while Production fell 6.9 points to 60.8, the lowest since April. Firms also saw the level of backlogs slip in July. The Order Backlogs indicator fell 4.9 points from June’s 23-year high to 57.9 in July. Suppliers took slightly less time to deliver key inputs, with the respective indicator down to 61.5 from 62.8 in June, falling for the first time in five months.

Companies saw stock levels accumulate as the growth in demand cooled slightly. The Inventories indicator rose by 3.0 points to 54.9 in July, the highest in two months. The Employment indicator slipped for the second straight month in July, following up June’s 0.5 point drop with a further 4.0 point drop this month. This left the indicator at 52.6, the lowest since March but marginally above its 12-month average of 52.1. The indicator has performed materially better since the turn of the year having spent eight months of last year below the neutral-50 mark.

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The Chicago ISM is important as it is a window into the national ISM reports which will be issued shortly. When you compare the graph below of the ISM Manufacturing Index against the Chicago PMI (graph above) – there is a general correlation in trends, but not necessarily correlation in values.

source and read the full report: Chicago PMI

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