• Fri
  • Dec 26, 2014
  • Updated: 10:03am
BusinessEconomy

Unexpected dip in US business activity

Measure falls below 50 for first time since 2009, as consumer spending barely rises

PUBLISHED : Saturday, 29 September, 2012, 12:00am
UPDATED : Saturday, 29 September, 2012, 3:09am

Business activity in the United States unexpectedly contracted this month for the first time in three years, adding to signs manufacturing will contribute less to the economic recovery.

The Institute for Supply Management-Chicago's business barometer fell 49.7 from 53 last month. A reading below 50 indicates contraction. The median estimate of 57 economists surveyed by Bloomberg forecast the gauge would fall to 52.8. Projections ranged from 50 to 54.5.

Other reports showed consumer spending barely rose last month after adjusting for inflation, but household sentiment climbed this month to a four-month high.

Household purchases rose 0.5 per cent, matching the median estimate of economists surveyed by Bloomberg and the biggest gain since February, according to data from the Commerce Department.

But the gain mainly reflected a 0.4 per cent jump in prices, the biggest since March last year, leaving so-called real spending up only 0.1 per cent.

The Thomson Reuters/University of Michigan final sentiment index rose to 78.3 this month from 74.3 in August.

Economists projected a reading of 79 after a preliminary reading of 79.2 issued earlier this month, according to the Bloomberg survey.

The Chicago group's gauge of new orders dropped to 47.4 from 54.8. The employment measure declined to 52, the weakest since March 2010, from 57.1 the prior month. The production gauge fell to 55.4 from August's reading of 57.4, the report showed.

Economists watch the Chicago index and other regional manufacturing reports for an early reading on the national outlook. The Chicago group says its membership includes both manufacturers and service providers with operations in the US and abroad, making the gauge a measure of overall growth.

Factory activity in the New York area contracted more last month than forecast, to its lowest level in more than three years, and production in the Philadelphia region shrank for a fifth month, Fed reports showed this month.

The ISM's monthly national factory index probably climbed to 50, the threshold of expansion and contraction, this month according to the median projection in a Bloomberg survey ahead of the report on Monday. As with the Chicago survey, a reading above 50 signals expansion.

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