Chicago purchasing managers reported that their May Business Barometer Index declined to 46.2 during May following an unrevised rise to 52.3 in April. It was the third figure in the last four months below 50, the break-even point between rising and falling activity. It also was nearly the lowest reading of the economic expansion and disappointed expectations for 53.0 in the Action Economics Forecast Survey. Haver Analytics constructs an ISM-Adjusted Index using the Chicago numbers, comparable to the overall ISM index to be released Monday. Our figure deteriorated as well to 48.8, after just two months above 50. During the last ten years, there has been a 61% correlation between the adjusted Chicago Purchasing Managers index and real GDP growth.

Deterioration in the component series was all-inclusive this month. The production series returned to nearly its lowest level of the recovery, as did the employment reading. During the last ten years, there has been an 82% correlation between the employment figure and the m/m change factory sector employment. The new orders figure fell below break-even as did vendor delivery speeds which indicated the quickest delivery speeds in just over two years. Inventories accumulated at a slightly slower rate.

The index of prices paid recovered to the highest point this year. A slightly higher 16 percent (NSA) of respondents paid higher prices but a sharply lower 10 percent reporting paying less, the least since December.

The MNI Chicago Report is produced by MNI/Deutsche Borse Group in partnership with ISM-Chicago. The survey covers a sample of over 200 purchasing professionals in the Chicago area with a monthly response rate of about 50%. The ISM-Adjusted headline index is calculated by Haver Analytics using these data to construct a figure with the ISM methodology. The figures can be found in Haver's SURVEYS database. The Consensus expectations figure is available in AS1REPNA.