May’s MNI Chicago Report showed the Chicago Business Barometer skidded 3.5 points to a seasonally adjusted 52.7, the 32nd consecutive month of expansion but its lowest level since September 2009.
The Barometer fell for a third consecutive month and the three month moving average of the Chicago Business Barometer, and of all seven Business Activity indexes, declined in May. Historically, either three consecutive declines in the Chicago Business Barometer or three consecutive declines in its three month moving average are associated with the onset of each of the last seven national recessions, with a lead of some 6-8 months.
May’s report was highlighted by a 7.1 point deceleration in Production, on the heels of an 11.5 point drop in April. May’s decline put Production at a neutral 50.0, its lowest since September 2009. New Orders fell less than Production, dropping 4.5 points to 52.9 after having fallen 5.9 points in each of the previous two months. The often lagging Employment Index fell 1.7 points to 57.0. Order Backlogs moved from expansion to contraction falling 10.5 points to 46.3, its lowest since October 2009.
After slowing expansion in seven of the last eight months, Inventories fell into contraction at 49.4, down 4.5 points on the month. The Prices Paid Index backed off 8.2 to 60.4, the lowest since September 2010.
Increased expansion was reflected in a slight 0.6 point slowing in Supplier Deliveries to 56.2.
Buying Policy indices uniformly increased with both Production Materiel and MRO Supplies lengthening by a statistically significant amount. MRO Supplies lengthened 4.4 days to 15.5, its longest since December 2010.
A third month of decline in the Barometer, pulled down by Production and New Orders, is consistent with a slumping economy and an abrupt end to the economic growth spurt seen from February to April.
BUSINESS ACTIVITY: BUYING POLICY:
52.7 Chicago Business Barometer 36.3 Production Materiel
60.4 Prices Paid 15.5 MRO Supplies
52.9 New Orders 112.7 Capital Equipment
56.2 Supplier Deliveries
46.3 Order Backlogs
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