What is happening with the manufacturing sector in Chicago? The Chicago PMI dropped -10.5 points in August, to 47.1, the lowest level since December 2025 and returning to contraction in business activity. This marks the largest monthly decline since the 2020 pandemic and was also well below estimates of 58.3 points. New orders declined -15.4 points, while production fell -8.8 points, the largest monthly decline since December. Order backlogs plunged -12.1 points, to their lowest since November 2025, and remained in contraction. Meanwhile, prices paid rose +3.8 points, to their highest reading since February 2022, pointing to a stagflationary mix of weakening activity and rising costs. Manufacturing activity may be heading toward its next downturn.