Chicago-Area Manufacturing Shows Unexpected Contraction In September

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After coming in flat in the previous month, activity in the Chicago-area manufacturing sector unexpectedly contracted in the month of September, according to a report released by the Institute for Supply Management - Chicago on Wednesday.

The report showed that the index of manufacturing activity fell to 46.1 in September from 50.0 in August, with a reading below 50 indicating a contraction in the sector. The decrease came as a surprise to economists, who had expected the index to edge up to 52.0.

A downturn in production and new orders contributed to the weakness in the sector, with the production index falling to 47.2 in September from 52.9 in August and the new orders index slipping to 46.3 from 52.5.

Employment in the sector also continued to contract, although the employment index edged up to 38.8 in September from 38.7 in August.

At the same time, the inventories index jumped to 38.9 in September from 27.5 in August. While a reading below 50 continues to indicate a contraction in inventories, the index rose to its highest level since November of 2008.

The report also showed that the prices paid index rose to 51.3 in September from 50.0 in August, indicating a modest increase in prices.

Commenting on the data, Peter Boockvar, equity strategist for Miller Tabak, said, "Manufacturing will be a key contributor to the third quarter GDP rebound, with the question always being sustainability."

"But with final demand still sluggish, there is only so much of an improvement that we will see and today's number highlights that risk," he added.

Thursday morning, the Institute for Supply Management is due to release its national report on activity in the manufacturing sector, with the manufacturing index currently expected to edge up to 54.0 in September from 52.9 in August.

After coming in flat in the previous month, activity in the Chicago-area manufacturing sector unexpectedly contracted in the month of September, according to a report released by the Institute for Supply Management - Chicago on Wednesday. The report showed that the index of manufacturing activity fell to 46.1 in September from 50.0 in August, with a reading below 50 indicating a contraction in the sector. The decrease came as a surprise to economists, who had expected the index to edge up to 52. (Market News Provided by RTTNews)