Chicago Business Barometer Falls Sharply

"The boom has busted," says one survey respondent.

Chalk up another win for the U.S. economy bears.

The National Association of Purchasing Management – Chicago said its widely watched Business Barometer plunged by more than 8 points in October, to 53.5. What’s more, the group said that inventory levels, which rose at a disconcerting rate last month, expanded at an even higher rate in October.

“Last month we suggested that either businesses were expecting good times ahead, and building inventories to meet three expectations, or the economy was not as robust as it appeared otherwise,” NAPM – Chicago said in a statement. “With slowing production, new orders, and shrinking order backlogs, the opportunities to painlessly bring inventories under control are limited.”

The new orders index shed 13 points to 54.1, production dropped 8 points to 59.2, and order backlogs fell about 4 points to 47.5.

“While employment grew much more slowly than production last month, this month’s jump in the employment index raises the potential for layoffs in the future to bring employment in line with production,” NAPM – Chicago said. “The slowing new orders index provides little evidence of the potential to grow out of the imbalances in inventories and employment.”

The good news is that pricing pressure is easing. While the latest report doesn’t pinpoint a specific reading on inflation, it does show a slowing in the breadth in the price increases.

Among the comments from those surveyed: “Construction is in meltdown. Price are 25-50 percent lower than two years ago; suppliers respond almost immediately due to lower demand; customers want high-cost upgrades included. The boom has busted.”

More in Supply Chain