A big slowdown for month-to-month growth in new orders helped pull down the Chicago PMI by 11 points in May to 56.6 to indicate the slowest rate of monthly growth since November 2009. New orders fell nearly 13 points to 53.5, still over 50 to indicate an increase compared to April but the weakest reading since September 2009. Growth in backlog orders almost entirely evaporated while inventories surged which may suddenly may indicate an unwanted build tied to slowing activity. Delays in deliveries shortened, which is also consistent with general slowing, while production, at 56.0, is still strong but well down from a run of 70 readings. Prices for raw material inputs, at 78.6 and in contrast to most of the readings, did not slow very much. A plus in the report is a comparatively mild slowing in employment, down nearly three points to a still strong 60.8 to indicate solid month-to-month growth in total payrolls as this report includes all areas of the economy. Markets are showing no significant reaction to the report.Let's look at the data from the report:
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Notice the drop across the board in the major categories -- production, new orders and order backlogs. While the overall number is still positive, the internals are very concerning. Not only do they confirm the slowdown we've seen, but also indicate the need to be very watchful of the manufacturing numbers going forward.
