Business activity in the U.S. Midwest expanded in March for an 11th straight month but at a much slower pace than expected, raising concerns about the strength of economic recovery, a report showed on Wednesday.
The National Association of Purchasing Management-Chicago business barometer fell to 57.6 from 63.6 in February. Economists had forecast the index at 61.5. A reading above 50 indicates expansion.
A feature was the jump in prices paid, to 75.7 from 67.5 in February, as rising prices for energy and many raw commodities start to bite.
“The most worrisome aspect of this report is the extraordinary leap in prices of commodities used in the early stages of production. That indicates the Fed’s concerns about deflation are again misplaced,” said David Littmann, chief economist with Comerica Bank in Detroit.
Job creation in the Midwest remains sluggish. The employment index slipped to 49.2 from 54.8 in February and has been above 50 only three times since March 2000.
The index for new orders for March dropped to 60.4 from 67.5 in February. Inventories, which are not used to calculate the index, rose to 54.3 from 46.5.
Because Chicago is the economic hub of the Midwest, many view the NAPM-Chicago report as a litmus test for U.S. factory output, although both manufacturing and service sector companies are included in the index.
U.S. Treasury prices rallied on the data while stock prices slipped.