Chicago-area business activity expanded at a much slower rate in the month of May, according to a report released by the Institute for Supply Management - Chicago on Thursday, with the business barometer falling to its lowest level in well over two years.
The report showed that the Chicago business barometer fell to 52.7 in May from 56.2 in April, although a reading above 50 still indicates growth. Economists had been expecting the business barometer to show a much more modest decrease to a reading of 56.1.
With the much bigger than expected decrease, the Chicago business barometer fell for the third straight month and hit its lowest level since September of 2009.
The slowdown in the pace of growth came as production fell to neutral, with the production index dropping to 50.0 in May from 57.1 in April.
The new orders index also tumbled to 52.9 in May from 57.4 in April, indicating a significant slowdown in the pace of new orders growth.
The report also showed that the order backlogs index plummeted to 46.3 in May from 56.8 in April, with the reading below 50 indicating a contraction. The inventories index also fell to 49.4 from 53.9.
Meanwhile, the employment index showed a relatively modest decline, edging down to 57.0 in May from 58.7 in April. The lower reading still pointed to a modest slowdown in the pace of job growth in the Chicago area.
On the inflation front, the prices paid index dropped to 60.4 in May from 68.6 in April, suggesting a notable slowdown in the pace of price growth.
Friday morning, the Institute for Supply Management is scheduled to release its report on national manufacturing activity, which is likely to answer the questions raised by a mixed batch of regional reports.
Economists expect the ISM's manufacturing index to edge down to 54.0 in May from 54.8 in April, suggesting a slowdown in the pace of growth.
by RTT Staff Writer
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