Chicago Business Barometer Falters in Q1

Written by Sandy Williams

The Chicago Business Barometer dropped to a one-year low in March. The indicator of U.S. economic activity slid 4.5 points to register 57.4. While a reading above 50 still indicates growth, three of the five components of the barometer declined. The production index was at its lowest level since October, and the new orders index was at its lowest level in a year. The indexes have plunged 28 and 19 percent, respectively, since December.

The backlog indicator was at an 11-month low, slowing for the third month to a reading just above neutral. Suppliers reported difficulty keeping up with input requests, resulting in longer supplier delivery times.

“Multiple firms reported the increased price of steel, among other materials, as impacting their business while others noted that persistently high prices were forcing them to find new suppliers,” said MNI Indicators.

The slump in orders and production had little effect on hiring. Employment levels increased to the second highest level in the past 12 months.

MNI economist Jamie Satchi noted the barometer increased for six consecutive quarters before dropping in Q1 due to weaker orders and output.

“Troubles higher up in firms’ supply chains are restraining their productive capacity, and higher prices are being passed on to consumers. On a more positive note, firms remain keen to expand their workforce,” he added.

About 50 percent of the firms surveyed expect orders to grow in the second quarter, while only 9.4 percent expect a decrease.

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