The MNI Chicago Business Barometer fell 1.1 points to 49.3 in May from 50.4 in April, the lowest level since February and the sixth time it has been in contraction over the past 12 months.

Following the decline in April, the latest results show activity stumbling in the second quarter, following only moderate growth in Q1. Barring a solid revival in June, Q2 could be the weakest outturn since Q4 2015 given the April-May average of just 49.9.

The Barometer’s decline was led by a 6.6 point fall in Production and was accompanied by a mild setback in New Orders, with both falling below 50. While these were the only components that fell between April and May, out of the five components which make up the Barometer, four of them were in contraction. Only Supplier Deliveries was above 50.

Production fell to the lowest level since February, while New Orders declined to the lowest since December 2015. In contrast, Order Backlogs bounced back 9.0 points, although failed to recoup all of April’s large loss, and remained below 50 for the 16th consecutive month. Employment rose marginally but also remained in contraction where it has been in ten of the past 12 months.

Inventories tumbled by 11.7 points to 37.9 in May, the lowest since November 2009 and the seventh consecutive month in contraction. The weakness in inventories could signify uncertainty about future business growth. Supporting this, a special question posed to the Chicago panel in May showed that 68.7% of respondents did not plan to increase business investment over the next six months.

Supplier Deliveries were unchanged on the month following a solid rise in April that left the indicator at the highest since October 2014 and suggesting there have been some bottlenecks in the supply chain. Time to source production materiel lengthened to the highest since August 2014 while that for capital equipment was the largest since June 2006.

Prices Paid fell slightly having picked up by more than 10.0 points in April.

Chief Economist of MNI Indicators Philip Uglow said, “While expectations are that growth in the US economy will bounce back in Q2, the evidence from the MNI Chicago Report shows activity weakening from an already low level. Firms ran down stocks at the fastest pace for more than 6 years in May, and while a rebuilding over the coming months could support output, the underlying message appears to be that businesses are not confident about the outlook for growth.”