New orders and order backlog picked up sharply in July at Chicago area companies, boding well for a strong second half for the local economy, a monthly survey of purchasing agents found.
The Purchasing Management Association of Chicago said Monday that its index of leading economic indicators rose to an unadjusted 61.3 last month from 57.2 in June. Adjusted for seasonal factors, the index rose to 56.6 from 55.7.
”It`s not flamboyant but good, solid progress,” said Jack Bishop, an economist for the trade group.
A reading above 50 indicates an expanding economy; below 50 means it`s contracting.
The index measures production, new orders, order backlog, inventories, employment, vendor deliveries and prices.
A year ago, the index stood at 49.8.
The purchasers` new orders index rose sharply last month, as more than three times as many companies reported increased orders as those reporting decreases.
Order backlog soared as well. Nearly one-third of the companies said backlog grew last month, while 18 percent reported drops. Half had no change. The combined strength in new orders and order backlog ”bodes well for production in future months,” Bishop said.
In July, production continued to grow at strong levels, slightly outpacing June levels.
”The only cloud on the horizon is that prices continue to go up,”
Bishop said.
The association`s price index hit its highest level since May, 1984. Fifty-six percent of 200 companies polled said prices they paid rose last month. Only 1 percent reported a decline in prices.
Though purchasers see such a trend as negative, higher prices aren`t necessarily a bad sign for the economy, Bishop said. It shows that demand is strong enough that price increases are sticking, he said.
Vendor deliveries slowed to their lowest pace in three years, again evidence that demand is healthy.
”These are all nice, consistent signs of continuing progress” for the Chicago-area economy, Bishop said.
Employment remained flat last month. The same number of businesses–17 percent–said they`re increasing employment as said they`re cutting jobs. The rest reported that employment remained the same.
Inventories were little changed.
