The Chicago Business Barometer, a key gauge of regional manufacturing health, rose sharply in May, reaching 62.7 – its strongest level since early 2020. Produced by MNI Indicators and ISM‑Chicago, the index jumped 13.5 points, pulling the region back into clear expansion after slipping below neutral in April.

May Barometer Jumps 13.5 Points to 62.7

The index’s surge to 62.7 marks the joint second‑largest monthly gain since the survey began in 1967, according to the May release. Only the July 2020 rebound, which followed pandemic shutdowns, posted a larger single‑month increase. A reading above 50 signals month‑over‑month growth, and the May figure suggests momentum is accelerating across the Chicago manufacturing corridor.

New Orders Surge 18.2 Points – Highest Since Jan 2022

The new‑orders component, a leading indicator for future production and hiring, climbed 18.2 points to its highest level since January 2022. This jump underscores firms’ optimism about demand, a sentiment echoed by the survey’s producers, who noted that order backlogs also rose 9.4 points, returning to expansionary territory.

Employment Slides While Other Subindices Expand

Among the five major components, employment was the lone soft spot, slipping 1.3 points despite remaining above March’s level.. Analysts caution that reduced hiring plans may reflect a supply‑constrained labor market rather than a retreat from growth, as firms anticipate future expansion will rely more on productivity gains than payroll increases.

Supply Chains Reposition Amid Geopolitical Risks

Special questions in the May survey revealed that 52% of Chicago‑area manufacturers are increasing raw‑material inventories to boost resilience, while roughly 54% are diversifying suppliers and strengthening real‑time collaboration. Additionally,40% reported shifting sourcing away from regions embroiled in geopolitical conflict, highlighting a proactive approach to supply‑chain uncertainty.

What Remains Unclear About Future Hiring Trends?

While the barometer paints a picture of expanding production, the employment subindex’s dip raises questions about the durability of hiring. The report does not specify whether firms plan to resume hiring once inventory buffers are in place, leaving analysts to wonder if the labor market will keep pace with the production surge.

According to the report, the prices‑paid component rose 3.5 points, reaching its highest level since May 2022, driven by higher oil prices and fuel surcharges. Federal Reserve officials, meeting in mid‑June, will watch these cost pressures closely as they assess whether inflation is moving back toward the 2% target.

The Chicago reading often foreshadows the national ISM Manufacturing Index, due Monday, which has lingered in contraction for two years. a strong Chicago figure could therefore amplify expectations of a broader manufacturing revival.