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The Chicago Business BarometerTM, produced with MNI, eased further to 44.4 in July from 49.7 last month, the second sub-50 reading in 30 months.
Four of the five components were in contraction territory this month, with only Supplier Deliveries above 50.
The weakness in the Barometer observed in Q2 continued into the current quarter, with the latest outturn making it the weakest start to Q3 since 2009.
The Production indicator fell 22% on the month to hit a 10-year low. Demand remained muted, highlighted by the New Orders indicator that subsided further into contraction.
Order Backlogs remained below 50 for the third consecutive month, although it rose slightly on June’s reading.
Firms continued to accumulate inventories amid longer lead times and economic uncertainty.
Weaker demand and production led firms to adjust their workforce. The Employment indicator fell into contraction for the first time since October 2017 and hit the lowest level since October 2009.
This month’s special question asked firms about their views on the US economy’s growth in the second half of the year. Two in five firms expected the economy to see slower growth than currently, with some holding tariffs responsible for the slowdown. The majority, at 46%, did not expect any change while only 14% expected the economy pick up.
“Sentiment faded further with firms facing weakness across the board. Global risks, trade tensions, slowdown in demand and sombre growth expectations, all jeopardize business conditions. Firms are not panicking yet, but the latest report isn’t adding to the cheer. The above risks lend weight to a monetary easing approach by the Fed, albeit a gradual one,” said Shaily Mittal, Senior Economist at MNI.
