Business activity in the U.S. unexpectedly contracted in September for the first time in three years, adding to signs manufacturing will contribute less to the economic recovery.
The Institute for Supply Management-Chicago Inc. said today its business barometer fell 49.7 this month from 53 in August. A reading of 50 is the dividing line between expansion and contraction.
Uncertainties surrounding domestic fiscal policy and weakening economies in Europe and China may prevent companies from adding to headcount and ramping up production. Slow growth prospects prompted the Federal Reserve to announce more accommodation measures earlier this month in a bid to help spur the three-year-old expansion.
The median estimate of 57 economists surveyed by Bloomberg forecast the gauge would fall to 52.8. Projections ranged from 50 to 54.5.
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, today’s report showed.
Factory activity in the New York area contracted more than forecast in August, 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.
Household spending increased at a 1.5 percent annual rate in the second quarter, the lowest in a year, Commerce Department data show. Companies’ spending on equipment and software rose at a 4.8 pace over the same period, the weakest since the third quarter of 2009.