Chicago Business Barometer Signals Economy on Edge of Recession
WALL STREET JOURNAL
A closely-watched index gauging U.S. factory output fell to a near 2 1/2-year low in May, indicating the economy might be heading back toward a recession.
The Institute for Supply Management-Chicago reported Thursday that its business barometer fell 3.5 points to 52.7 in May, the third straight monthly drop and lowest reading since September 2009.
Readings above 50.0 reflect economic expansion. However, three consecutive declines are “associated with the onset of each of the last seven national recessions, with a lead of some six-to-eight months,” ISM-Chicago said in a news release.
The May reading was lower than economists expected. The consensus forecast of economists surveyed by Dow Jones Newswires was for the barometer to stand at 56.0.
ISM-Chicago’s production index fell 7.1 points in May to a neutral reading of 50.0, also the lowest since September 2009.
The index is determined from surveys of purchasing managers in the Chicago region. It was released on the same day that other indicators revealed the fragile state of the U.S. economy.
Labor Department data released Thursday showed the number of workers filing for unemployment benefits rose by 10,000 to 383,000 for the week ended May 26. And, the latest reading on gross domestic product– a measure of all good and services produced in the U.S.–rose just 1.9% in the first quarter.
The business barometer is formerly known as the Chicago Purchasing Managers Index, or Chicago PMI.
Purchasing managers participating in the survey do business beyond the Chicago region, thus providing a snapshot of nationwide economic activity. The purchasing managers, according to ISM-Chicago, represent various sectors of economy including retail, manufacturing, and resources.
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