CHICAGO (MNI) - The MNI Chicago Business Barometer decreased to 55.2 in May from 58.3 in April, the lowest level since January.
Optimism among firms about business conditions eased for the first time in four months. Three of the five Barometer components led May's decline, with Order Backlogs and Supplier Deliveries increasing.
After rising for three consecutive months, demand lost ground in May. New orders fell by a hefty 9.6 points, to hit the lowest level since January. In line with lower orders, Production also receded, although by a softer margin. The indicator was down 3.8 points to 55.7 from 59.5 in April. Order Backlogs remained under contractionary territory for the sixth consecutive month, although rose by 4.8 points. Suppliers took longer to deliver key inputs, with the respective indicator 4.3 points higher at 60.3 in May, the highest level since September 2014. There were reports of longer delivery times due to suppliers running out of products because of maintaining low inventories.
Companies accumulated inventories at faster pace yet again. The Inventories indicator was up by 3.4 points to 56.7 in May.
The Employment indicator remained broadly stable after leaping out of contraction territory last month. Although the indicator has expanded only eight times in last 24 months, it is showing tentative signs of a pick-up, sitting above 50 in two of the last three months. Panellists reported a rise in temporary hires and cut in executive level positions to manage costs.
This month's special question asked firms if they planned to expand their workforce in the next three months. Over half of respondents planned on hiring, a sign that businesses were optimistic about demand in the summer. While a third of respondents did not intend on hiring, 14% of them were unsure.
Of those who were keen on expanding their workforce, 40% intended on hiring permanent employees, 33% on temporary employees and 27% expected a mix of both permanent and temporary employees. When the same question was posed in May 2014, the majority preferred a more permanent setup rather than a flexible and contingent workforce.
Inflationary pressures at the factory gate eased for the third consecutive month, though remain at an elevated level. Prices Paid have jumped almost 13% since last year, although the growth rate has eased in recent months. Panellists reported a continued rise in the price of steel and plastic products.
"May's fall in the MNI Chicago Business Barometer needs to be viewed in the context of the strength seen in the past three months. With the three-month average, broadly stable, it provides a better guide this month to the underlying activity. Still, business activity over the past three months is running significantly above the levels seen during the same time last year," said Shaily Mittal, senior economist at MNI Indicators.
The survey period ran from May 1 to May 18.
