Chicago area factory activity solid in September despite tariff impact - MNI

Factory sector activity in the Chicago area cooled in September but growth remained solid, amid reports that companies were being frustrated by "capacity constraints", including on the back of anticipated disruption to supply chains from international trade concerns, survey results revealed.

Market News International's manufacturing sector Purchasing Managers' Index slipped by 3.2 points last month to reach 60.4, missing economists' forecasts for a print of 62.0.

MNI attributed the slight slowdown in the rate of expansion of activity to a moderation in output and new orders as well as weaker hiring sentiment.

Production eased to a six-month low and growth in new orders to a five-month low, but MNI nevertheless described rates of expansion for both as "solid".

"Healthy levels of demand have left firms unable to complete orders, exacerbated by component allocation issues and employment shortages," the survey compiler said.

"[...] There was evidence that Hurricane Florence impacted on operations, specifically trucking routes, while the wider-effects of import tariffs and material shortages continued to rumble on in the background."

Linked to the above, and given the "scarce availability" of inputs and forecasts for increased demand, firms were said to be adding to their stocks following a marked rise in August.

Prices pressures were also prevalent, with a subindex of 'prices paid' at levels consistent with 10-year highs.

"Tariffs continue to push prices higher alongside material shortages; sourcing electrical components proved particularly difficult, according to firms," MNI said in a statement.

Responses to a 'special question' revealed that just over half of the companies surveyed expected their delivery times to lengthen.

According to Jamie Satchi, economist at MNI Indicators: "Supply-side frustrations continue to hamper firms' production lines and the majority of firms expect delivery times to lengthen further, anticipating ongoing trade disruptions to continue weighing on their suppliers."