The pace of business activity in the U.S. Midwest slowed in May as new orders fell to their lowest since September 2009, a report showed on Thursday.

The Institute for Supply Management-Chicago business barometer declined to 52.7 from 56.2 in April, falling short of economists' forecasts for a modest gain to 56.5.

A reading above 50 indicates expansion in the regional economy. It is one of the last regional factory activity surveys for the month ahead of the national manufacturing report due on Friday, which is expected to show growth in the sector slowed slightly in May.

The forward-looking new orders index fell to 52.9 from 57.4, while the gauge of employment slipped to 57.0 from 58.7.