Chicago PMI ticks lower in August

Economic activity in the Chicago area deteriorated a little more than expected in August, according to data released on Tuesday.

The MNI Chicago business barometer fell to 66.8 from 73.4 in July, missing expectations for a reading of 68.0.

This marked the lowest reading since June, after climbing to a two-month high in July. Order backlogs rose sharply while production sank, with firms saying that the available supply of raw materials and workers wasn’t sufficient to keep up with new orders.

The order backlogs index rose 11.6 points to 81.6, hitting its highest level since 1951 as firms reported a shortage of materials, freight inconsistencies, and insufficient staff. The gauge for supplier deliveries was up 6.3 points, hitting a three-month high of 92.8, with one survey respondent reporting the worst delivery times in three years.

The index for inventories rose 6.2 points to 48.8, still in contraction territory but the highest reading since March. Some firms reported stockpiling to get ahead of further supply chain disruptions, while others said their inventories were dwindling because of logistics issues.

The prices paid gauge increased 2.3 points to 93.9 .This was its best level since 1979 as companies continued to report higher costs for production materials.

The employment index was 0.8 points higher at 48.3 as demand for labour rose slightly in August, with firms struggling to find qualified workers for available jobs. The production gauge fell 7.8 points to a two-month low of 61 and the new orders index was 4.4 points lower at 67.8.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said: "The Chicago PMI recently has outperformed some of the other regional surveys, thanks to rebounding orders at Boeing, which is based in the city. But the index is not immune to the broad moderation in the pace of the industrial recovery, clearly visible in other surveys."