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The Chicago Business Barometer recoiled 8.0 points to 47.6 in February following a sharp increase to 55.6 in the previous month, led by significant declines in Production and New Orders.
Four of the five Barometer components declined between January and February, with only Supplier Deliveries posting an increase on the month. While the latest fall left the Barometer running a little below the 12-month average of 50.1, following significant weakness in Q4 2015, activity looks set to rebound in Q1.
The Barometer’s decline was led by an 18.5 drop in Production, which completely reversed January’s near 16 point gain, pushing it back into contraction. New Orders also fell sharply and Order Backlogs slipped further into contraction, a situation that has persisted for a year. Employment also declined significantly, leaving it at the lowest since November 2009 and the fifth consecutive month below 50.
Firms continued to drawdown stocks in February, with Inventories remaining in contraction for the fourth consecutive month.
Prices paid contracted at a faster pace in February to stand at the lowest since July 2009 as oil and other commodity prices continued to fall. In a special question put to the panel this month, 48% said that lower oil prices were helping business, mainly due to lower freight and transportation costs. 26% of respondents said that lower oil prices were hurting business, while 26% said they had little or no impact on their business.
Chief Economist of MNI Indicators Philip Uglow said, “If one looks beyond the gyrations seen over the past three months then trend activity has been running a little below the 50 neutral mark, highlighting continued sluggish activity levels, with manufacturers under particular pressure. Still, given the weakness in Q4, it looks like activity should pick up during Q1.”
