Chicago Business Barometer Surprisingly Dropped

After a huge jump last month, the business barometer fell 3.9 points to 46.1. The production, new orders and supplier deliveries indices also decreased to below 50, indicating contraction.

Three Month Moving Average Continued to Increase

Given the large number of highly cyclical industries included in the survey, it is not unusual for the Chicago business barometer to have large month-to-month swings. The 3-month moving average may provide a better assessment and it still continued to move higher even though it remains below the 50 threshold.

The production and new orders indices both drifted down more than five points to 47.7 and 46.3, respectively.

Employment Index Remained Flat

The employment index was relatively flat with only a 0.1 point improvement to 38.8, indicating that businesses are still trimming their workforce.

This report differs from more positive regional reports such as the Philadelphia and New York Fed manufacturing indices. While our outlook has diminished somewhat, we still expect the September ISM index to remain above 50.

Wachovia Corporation
http://www.wachovia.com

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