Chicago's Economic Barometer Shows Surprising Rebound in January Business Activity

MNI Indicators unveiled notable economic data on Friday, revealing that Chicago’s business barometer unexpectedly rebounded into expansion territory during January. This marks a dramatic reversal from the previous month’s weakness and signals strengthening economic momentum across the region.

Barometer Reading Signals Broad-Based Expansion Across Multiple Sectors

The Chicago business barometer jumped to 54.0 in January, a substantial leap from December’s downwardly revised 42.7. This marked the first time the indicator climbed above the critical 50-point threshold—which separates contraction from expansion—since November 2023. Economists had anticipated a more modest improvement to 44.0, making January’s result significantly more optimistic than expected.

The robust barometer reading reflects strength spreading across several key economic indicators. Employment showed particular vigor, with the employment index soaring by 17.5 points to reach its highest level since December 2024, though it still remained below the 50-point expansion threshold. The new orders index demonstrated even more impressive gains, surging by 15.8 percent to its highest point since March 2022, indicating strong demand from businesses.

Employment, Orders, and Production Drive January Surge While Prices Cool

Order backlogs also climbed substantially, jumping by 11.5 points to break above 50 for the first time since December 2022—a sign that companies are struggling to keep up with incoming demand. Meanwhile, the production index rose by 9.1 points to its highest level since December 2023, now positioned well above the 2025 average, suggesting factories and service providers are ramping up output to meet increased orders.

In a notable countermovement, the prices paid index fell by 9.0 points, ending four consecutive months of increases and dropping to its lowest level since January 2025. This moderation in input costs provides some relief to businesses navigating the economic expansion.

First Expansion Since Late 2023 Marks Significant Turn in Economic Momentum

The January barometer reading carries considerable weight given its comprehensive improvement across virtually all tracked metrics. The combination of rising employment expectations, expanding order books, and increased production signals that Chicago’s business community has shifted from defensive positioning to growth mode. This represents the first sustained expansion signal from the region in over two years, potentially indicating broader strength in the Midwest’s manufacturing and service sectors.