Chicago Business Activity Shows Signs of Rebound in December

A report from MNI Indicators revealed a notable recovery in Chicago-area business activity for December 2023, with the Chicago business barometer rising to 43.5, up from a significant decline to 36.3 in November. This increase surpassed economists' expectations, who had predicted a more modest rise to 39.5. Despite this rebound, the index has remained below the neutral mark of 50 for the twenty-fifth consecutive month, indicating ongoing contraction in the region's business environment.

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The improvement in the Chicago business barometer was driven by substantial increases in several key indices. The new orders index surged by 11.8 points, effectively reversing much of the previous month's decline. Additionally, the production index rose by 9.6 points, reaching its highest level since March and surpassing its 2025 average. The order backlogs index also experienced a significant jump of 12.3 points, although it remains below the critical threshold of 40, having only exceeded this mark for three months throughout the year.

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Conversely, the supplier deliveries index saw a decrease of 3.6 points but remained above 50, indicating that delivery times are still relatively stable. The employment index, however, fell by 0.6 points, marking its lowest level since May 2009, suggesting potential concerns regarding job growth in the region.

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While the rebound in the Chicago business barometer is a positive sign, the persistent contraction indicated by the index remaining below 50 raises questions about the overall health of the local economy. The slight dip in the prices paid index, which fell by 1.1 points, also highlights ongoing inflationary pressures, as no respondents reported lower prices for the third consecutive month.

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MNI Indicators noted that the rebound in the business barometer reflects a complex economic landscape, where improvements in certain areas coexist with challenges in employment and pricing. The report emphasizes that while there are signs of recovery, the overall economic environment remains fragile.

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Some economists express caution regarding the interpretation of the rebound, arguing that the sustained contraction over the past two years cannot be overlooked. They highlight that while the recent data may suggest a recovery, it is essential to consider the broader economic context and the potential for volatility in future months.

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There is a lack of consensus among analysts regarding the sustainability of this rebound. While some view the increase in the business barometer as a turning point, others caution that the underlying issues affecting employment and inflation could hinder long-term growth.

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“While the Chicago business barometer largely offset the steep drop seen in November, it remained below 50 for the twenty-fifth consecutive month, indicating a continued contraction.” — MNI Indicators

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