Chicago-area business activity unexpectedly contracted in the month of June, according to a report released by MNI Indicators on Friday.
MNI Indicators said its Chicago business barometer tumbled to 49.7 in June after rising to 54.2 in May, with a reading below 50 indicating a contraction in regional business activity. Economists had expected the index to edge down to 53.1.
With the much steeper than expected decline, the Chicago businesses barometer dropped below 50 for the first time since January of 2017.
“The Barometer entered contraction territory, having remained above 50 for over two years,” said Shaily Mittal, Senior Economist at MNI. “With customers rethinking their purchases, demand tumbled, and consequently firms pulled back production, weakening overall business sentiment.”
She added, “In coming months, our survey will provide further evidence as to whether the diminished business confidence is temporary amid tariffs woes or more structural calling for some counter measures.”
The sharp pullback by the business barometer came as the new orders index fell into contraction territory for the first time since January of 2017 and the production index plunged to a three-year low.
The order backlogs index also remained in contraction territory, while MNI Indicators said there were some reports of hiring new staff and summer interns to replace retirees.
The report also said factory gate prices picked up for the second consecutive month amid evidence of tariffs leading to higher prices, with some firms looking for cheaper alternate sources.
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