The Chicago Business BarometerTM, produced with MNI, tumbled -8.2 points to a six-month low of 40.4 in May. The headline index has now been in contractionary territory for nine consecutive months.
All subindexes softened in May, with Order Backlogs experiencing the most pronounced contraction. All subindexes except Supplier Deliveries and Prices Paid were in contractive (sub-50) territory this month.
Production slumped by -8.3 points in May, more than reversing the April rebound. Anecdotal evidence suggested firms’ customers were seeing a marked slowdown in business activity. Rising financing costs was flagged as slowing customer activity, particularly residential investment.
New Orders declined by -6.0 points to a six-month low. This is the second-lowest print since June 2020. Firms cited customers having previously overordered.
Order Backlogs fell -15.1 points to the lowest level since May 2020. Automotive backlogs remained elevated.
Employment softened by -2.7 points in May. The subindex has been in contractive territory for nine months now barring April, as firms struggle to hire and retain staff.
Supplier Deliveries eased by -2.7 points as supply chain pressures continued to normalize for the majority of inputs.
Inventories slipped -4.4 points to the lowest level since July 2021. Firms were slowing restocking and working through previous build-up of inventories due to more muted demand.
Prices Paid cooled by -9.4 points to the softest since August 2020. Weak demand was cited as the key downwards driver of prices. The passthrough of lower commodity prices from suppliers remained slow and moderate.
In May, the Chicago SurveyTM asked firms what their greatest challenges to conducting business at the moment are. Increased costs were voted by the largest share as the greatest challenge, followed closely by labor shortages. Declining economic sentiment and delivery/lead times came in equal third. Fifth most challenging was decreased demand and sixth material shortages.
