Chicago PMI Falls Short, Driving Stocks Down

(Updated to include further detail from the Chicago PMI report.)

NEW YORK (TheStreet) -- An important gauge of manufacturing activity surprised Wall Street with a worse-than-expected figure, driving stocks lower Wednesday morning.

The Chicago Purchasing Managers Index, which measures the health of Midwestern manufacturing industries, came in at 46.1, well below the 51 to 52 rating that most economists and analysts were expecting. A number under 50 suggests that the economy is shrinking; above 50 means it's growing.

In August, the index read 50.0 and in July 43.4.

The Dow Jones Industrial Average retreated sharply from early gains. The index was down by more than 100 points about an hour after the Chicago figures hit the wire.

Other key portions of the Chicago report -- new orders and order backlogs - also fell in September. The new-order index slipped to a seasonally adjusted 46.3 in September from 52.5 the previous month, the first month-to-month retraction since May.

The order-backlog index, meanwhile, which offers insight into inventory-restocking activity among businesses, declined in September to a seasonally adjusted 36.7. In August, the backlog index came in at 45.8.

Revised GDP figures from the Commerce Department Wednesday also indicated a shrinking U.S. economy.

-- Written by Scott Eden in New York

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