Chicago business barometer hits 47.1 as business lending turns negative
The MNI Chicago business barometer fell to 47.1 in August from 57.6 in July, dropping below the 50 line; economists had expected a rise to 59.0. It is the first contraction reading since April. Federal Reserve data show commercial and industrial loans contracting at a 2.4 per cent annual rate in July after growing 6.9 per cent in June.
Economics & Markets··Evening
Chicago barometer lands far below expectations
MNI Indicators' Chicago business barometer fell to 47.1 in August from 57.6 in July, dropping below the 50 line that separates expansion from contraction. Economists had expected the index to rise to 59.0, leaving the outturn roughly 12 points below consensus. It is the first contraction reading since April and the lowest level since December. Values below 50 on the index point to contraction in business activity in the Chicago area. July's 57.6 reading sat in expansion territory before the index slid 10.5 points in a single month. The MNI Indicators release draws on purchasing-manager survey responses from the region and covers production and new-order components. The print shows regional manufacturing and services demand cooled far faster than forecast. The return to contraction territory captures a sharp deterioration in the regional demand outlook. April was the previous month that showed contraction before July's rebound.[1]
Bank credit to businesses pulls back
In the Federal Reserve's weekly banking release, commercial and industrial loans at US commercial banks contracted at a 2.4 per cent annual rate in July after growing 6.9 per cent in June and 14.8 per cent in the second quarter. Total bank credit grew at a 5.5 per cent annual rate in July and stood at 19,828.1 billion dollars in the week ending 19 August. Loans and leases slowed to 3.8 per cent from 5.6 per cent. Consumer loans accelerated to 6.9 per cent from 4.3 per cent, contrasting with the business-side pullback. Holdings of Treasury and agency securities rose 14.2 per cent. Deposit growth remained below June's 5.4 per cent at 3.2 per cent. The rates are seasonally adjusted annual rates and are adjusted for breaks in the series. The H.8 release tracks weekly changes across major loan categories at domestically chartered commercial banks.[2]
Regional output and national credit both soften
The Chicago barometer plunging to 47.1 shows manufacturing and services demand in the region cooled sharply in August, with the 10.5-point one-month drop landing far below economists' 59.0 forecast. Commercial and industrial loans contracting at 2.4 per cent in July in Federal Reserve data points to banks pulling back the credit line to companies after that category grew 14.8 per cent in the second quarter. The two gauges cover different geographies and periods yet sketch weaker activity and financing conditions on the business side. In the same release total bank credit grew at 5.5 per cent while loans and leases slowed to 3.8 per cent, and consumer loans accelerated to 6.9 per cent. Holdings of Treasury and agency securities rose 14.2 per cent. Deposit growth remained at 3.2 per cent, below June's 5.4 per cent pace. Total bank credit stood at 19,828.1 billion dollars in the week ending 19 August.[1], [2]
