Chicago PMI is a composite index of business conditions in the Chicago area. Data from Chicagoland firms is collected by the financial news firm, Market News International, through manufacturing and non-manufacturing surveys sent to businesses. A drop in demand for goods is reflected in businesses’ responses in the Chicago PMI survey, which, is in turn, reflected in a lower index reading. Readings above 50 indicate an expanding business environment, while readings below 50 indicate a contractionary environment.
In August, the Chicago PMI declined by 6.6 points to a level of 66.8. This decline comes after the index rose to its second highest reading in July. The figure came in 1.2 points below market expectations. Despite the decline, the index remains firmly in expansion territory and continues to hoover above 50 points.
Economic activity in the Chicago area saw a slight slowdown this month, although it continued to expand. Firms still find it challenging to meet the elevated levels of demand. Order backlogs rose sharply, hitting its highest level since 1951, while production declined. Businesses reported an insufficient supply of raw materials and continuing labor shortages. Supplier deliveries were also unreliable, with some respondents reporting the worst delivery times in three years. Prices paid by firms rose to their highest level since 1979, highlighting the inflationary pressures that are still very much present throughout the economy. Overall, the local business environment continues to expand, although the numerous supply chain obstacles are putting a crimp in the expansion. Firms are facing these challenges at a nationwide level, not just in the Chicago area. Sluggishness will result in the growth rates until this resolves itself.
August 31, 2021