Business activity in the Chicago-area unexpectedly contracted in the month of September, according to a report released by the Institute for Supply Management - Chicago on Friday, with the business barometer falling to a three-year low.
The ISM Chicago said its business barometer dropped to 49.7 in September from 53.0 in August, with a reading below 50 indicating a contraction in business activity. With the decrease, the business barometer fell to its lowest level since September of 2009.
The drop came as a surprise to economists, who had been expecting the business barometer to come in unchanged compared to the previous month.
A contraction by new orders contributed to the drop by the business barometer, with the new orders index tumbling to 47.4 in September from 54.8 in August.
The production index also dipped to 55.4 in September from 57.5 in August, although the reading above 50 pointed to continued growth.
Similarly, the employment index dropped to 52.0 in September from 57.1 in the previous month but remained above the key 50 level.
The order backlogs index edged down to 41.6 in September from 41.7 in August, while the inventories index slipped to 51.1 from 51.2.
On the other hand, the prices paid index surged up to 63.2 in September from 57.0 in August, indicating an acceleration in the pace of price growth. The increase lifted the index to its highest level since April.
Peter Boockvar, managing director at Miller Tabak, said, "Bottom line, manufacturing at the national level has been slightly below 50 for the past 3 months and the regional surveys in September point to something similar."
Next Monday, the Institute for Supply Management is scheduled to release its report on national manufacturing activity in the month of September.
The ISM said its index of manufacturing activity edged down to 49.6 in August from 49.8 in July, with a reading below 50 indicating a contraction in activity. The index remained below the key 50 level for the third straight month.
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