The Chicago Business Barometer reports that decreases in new orders, order backlogs, and softer production pulled the Purchasing Managers Index (PMI) down by 4.1-points to 40.5 in May.
The index is at its lowest level since January, and May marks the 18th month below 50. Increases in supplier deliveries and employment brightened the report, according to the latest report by Market News International (MNI) and the Institute for Supply Management (ISM).
In May, the fall in new orders clipped the index by 6.0 points, bringing the figure 13.0 points below March’s high for the year. Production sank the index below the 12-month average for the first time since January. Order backlogs plunged 8.5 points to the same rate as November, pushing to the lowest reading since May 2024.
When asked whether economic uncertainty would delay capital investments, 48% of respondents stated they would not delay capital investment plans. Twenty-four percent of respondents are delaying capital investments until previous business conditions return. The survey also found that 17% of respondents are temporarily holding investments through the economic and tariff negotiations period. Ten percent of participants stated that they do not know.
The second question posed to respondents was whether extra uncertainty would drive them to add additional inventory to their raw materials supply. The majority of respondents were evenly split between 41%, planning to make a modest build up on raw materials, and the other 41% that will make no changes to raw material inventories. Seven percent are planning significant increases to raw material inventories and 10% are unknown.
Inventories slipped 2.3 points but are hovering at a healthy level above the 34.8 March reading. No respondents reported paying lower prices in May.
