–Employment Index 51.5, Down from 58.7; Supplier Delivs 55.9 vs 64.8.

By Denny Gulino

WASHINGTON (MNI) – The Chicago Business Barometer for July came in
at 58.8, slightly less than median expectations and under June, but
other indices took a bigger hit, with employment falling to 51.5, just
above the break-even point and the lowest in 19 months.

Supplier deliveries went to 55.9 from June’s 64.8.

Overall, the report was in line with the view that the second
quarter has begun with less than the firm reacceleration in activity
that many forecasters earlier anticipated but nevertheless with
enough signs of life that leave open the possibility of stronger
activity later.

Elsewhere in the Chicago PMI report, “prices paid” was at 71.7 for
July, slightly above June’s 70.5; “inventories” was at 53.2 vs. 46.9,
“production” was at 64.3 vs 66.9 and “order backlogs” was at 55.7 vs.
49.3.

The month’s results “stabilized at the average of the May and June
readings,” the Chi-PMI survey committee said, pointing out that despite
some setbacks, the main index showed its 22nd month of expansion.

The headline number had been 56.6 in May, the low point for the
year, after reaching just barely into the 70s in February and March.
Fifty is the dividing line below which there is no evidence of
expansion.

Comments from some respondents tended to lean toward the optimistic
despite July’s overall decline. “We have seen steady increases in orders
all year,” one wrote. “The forecasted demand from our customer base
shows more increases for 2012. Let’s hope they hold true.”

“I don’t hear anyone saying that they’re ‘going gangbusters,’
another respondent said, “but we have many new opportunities and new
customers practically breaking down the doors to place work.” He also
referred to supply problems, saying, “On the other hand, I also wish we
could get a casting or forging in on time.”

There were comments that reflected the slackening of activity, with
another writing, “Business is still strong but we see a little slowdown
this summer. However, all indications are it should be a strong shipping
year.”

Another said simply, “It appears business is slowing down
some.” Said another, “New orders dropping a little overall,
but some product lines remain very strong. Revenues same as last month
as backlog of orders keeping us very busy.”

One observed, “Many suppliers are being very careful with their
capital expenditures because of continued uncertainty with the future
economic climate.”

Others wrote that transportation costs are still rising even though
fuel prices moderated slightly, and that “high commodity levels are
still impacting profits,” forcing a price increase.

The Chicago PMI survey taps the views of members of Chi-PMI, the
Chicago branch of the Institute for Supply Management, who reflect the
pace of business activity of their firms, many of which have sizable
services components and geographic reach well beyond the region.

** Market News International Washington Bureau: 202-371-2121 **

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