Chicago PMI Slips Into Contraction Again

Written by Sandy Williams

Manufacturing continues to be sluggish in the Midwest according to the latest survey by MNI Indicators. The MNI Chicago Business Barometer dropped back into contraction for a reading of 49.3, the lowest level since February and the sixth time below 50 in the past 12 months.

Both new orders and production fell below 50 between April and May. Production lost 6.6 points while new orders index was at its lowest level since December 2016. Backlogs recouped 9 points from April’s loss but continued in contraction for the 16th consecutive month.

The inventory index dropped 11.7 points to 37.9 for its lowest reading since November 2009. MNI suggests the weakness in inventories could be due to uncertainty about future business growth. This was backed up by a special question in which 68.7 percent of respondents said they did not plan to increase business investment over the next six months.

A slight decline in prices paid was noted after gaining more than 10.0 points in April.

“While expectations are that growth in the US economy will bounce back in Q2, the evidence from the MNI Chicago Report shows activity weakening from an already low level,” said MNI chief economist Philip Uglow. “Firms ran down stocks at the fastest pace for more than 6 years in May, and while a rebuilding over the coming months could support output, the underlying message appears to be that businesses are not confident about the outlook for growth.”

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