Manufacturing in the Chicago area contracted in April for a second straight month, as employment slid and a gauge of new orders fell to the lowest level in 1 1/2 years.
The National Association of Purchasing Management-Chicago said Wednesday that its factory index fell to 47.6 this month from 48.4 in March, when it slipped below 50 for the first time in five months.
A reading below 50 indicates contraction and a reading above 50 signals expansion. Economists had expected a reading of 48.9.
“The end of active fighting in Iraq has not yet stimulated a rebound in the demand for factory products,” said Steven Wood, chief economist at Insight Economics LLC in Walnut Creek, Calif. “With slack demand, production is stagnant and jobs are being eliminated.”
The new orders segment of the index dropped to 44.6 from 52.5 in March. That’s the lowest level since October 2001 and the largest decrease since August 2000.
The employment index fell to 43.7 from 45.1 in March. The region’s factories have been cutting jobs since March 2000, the longest decline in two decades.
A gauge of production rose to 51 from 49.1. The index had its biggest decline in 23 years in March, when it showed the first drop in production since December 2001.
But manufacturers are benefiting from falling energy prices. The prices-paid index fell to 55.9 from 62.8 in March. Crude oil prices have fallen by about a third over the past two months. Natural gas prices have dropped 35 percent.
The inventories index declined to 43 from 48, reflecting the fact that factories keep cutting stockpiles.
The Chicago area is home to more manufacturing jobs than any other U.S. metropolitan area, and economists and investors watch the index for clues about the direction of U.S. manufacturing. The national report will be released Thursday.
